Brief #5: Capital and Investment

By Markus Haacker  Kate L Harris  Professor Gesine Meyer-Rath  |  | 

The direct effects of health-related productivity shocks on economic output are magnified by their negative impact on investment. Poorer health decreases productivity, which results in lower economic output and consequently lower investment, which again reduces productivity and output over time.

Higher mortality reduces incentives for saving and investment. Empirical studies (not HIV-specific)
suggest that this could be an important link between HIV and growth, but there is no clear evidence on such
drops in savings and investment in countries facing a large HIV burden.

Some HIV-related spending may “crowd out” capital investment which would occur if the funds were used differently. However, to the extent that spending on the HIV response contains investment, the net effect on
investment and capital accumulation is mitigated and could even be reversed.

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