The Impact of AIDS Treatment on Savings and Human Capital Investment in Malawi

In American Economic Journal: Applied Economics, Hans-Peter Kohler and Victoria Baranov study the impact of antiretroviral therapy (ART), a treatment for AIDS, on savings and human capital investment in Malawi. In particular, they use spatial and temporal differences in ART availability to evaluate the impact of ART provision on cash savings, education expenditures, and children’s schooling.

The authors find that ART availability increases savings, expenditures on education, and children’s schooling significantly, even amongst those who are HIV-negative and thus, do not directly benefit from ART. For instance, halving the distance between a respondent and the ART facility—a reduction of about 6 km for the average respondent—results in an increase in the propensity to report any savings by 10 percentage points, increases expenditures on children’s education by US$2.5, and implies an increase in schooling for children of respondents by 0.3 years. These results are driven by a reduced perception of mortality risk after ART became available rather than the direct health effects of treatment. The authors conclude ART therapy leads to large and economically important increases in savings and investment behavior for both HIV-positive and HIV-negative individuals; these benefits should be incorporated into cost-benefit analyses of ART programs by governments and donor organizations.