Economic growth, convergence and the HIV/AIDS epidemic: a cross-country panel data analysis

Abstract

This thesis presents an analysis of the dynamic process of economic growth, national welfare and the HIV/AIDS epidemic. An assessment of the methodological designs of applied growth research is undertaken in order to polarise the limitations associated with cross-sectional growth regressions. The cross-country cross- sectional methodology that has been the dominant feature of empirical growth analysis may suffer from an endogeneity and omitted variable bias. A panel data approach is adopted in order to address the econometric issues associated with cross-sectional study designs. To highlight the discrepancies between theory and empirics, a rudimentary description of the Solow model is offered. Extensions of the Solow paradigm are also discussed and form the basis of the theoretical foundations of the research. The relationship between health and economic growth within the existing literature has considered the consequences of poor population health in determining national income levels. Disease-specific effects have been included in growth regressions to capture the output losses associated with the widespread reduction in human capabilities. This thesis contributes to the existing literature by testing the empirical relationship between economic growth and the HIV/AIDS epidemic for a broad cross-section of countries. Previous empirical studies have not presented a unified account of the epidemic's effects in determining cross- country productivity differentials. The way in which the epidemic might impede economic prosperity is considered by drawing upon the existing literature. The strengths and limitations of previous study estimates are considered in relation to the study design. A more robust empirical estimator for growth regressions is proposed in the form of a system Generalised Method of Moments estimator. The research extends on previous study estimates by considering the epidemic's effect across the conditional quantiles of the growth distribution. A central prediction of the neoclassical growth paradigm relates to the convergence hypothesis in which poorer economies are considered to achieve faster growth rates. By drawing upon the distributional changes in national income over time for the entire cross-section of countries, this thesis will assess the potential barriers that may violate the theoretical predictions of the convergence hypothesis. An empirical assessment of the role of convergence clubs, mortality and poverty traps will be presented through an analysis of the changes in health and income inequality over time. The distributional shifts that have occurred over the period under analysis consider the consequences of growth as a measure of national welfare.