By Jeremy Greenwood, Philipp Kircher, Cezar Santos and Michele Tertilt
Eleven percent of the Malawian population is HIV infected. Eighteen percent of sexual encounters are casual. A condom is used one quarter of the time. A choice-theoretic general equilibrium search model is constructed to analyze the Malawian epidemic. In the developed framework, people select between different sexual practices while knowing the inherent risk. The analysis suggests that the efficacy of public policy depends upon the induced behavioral changes and general equilibrium effects that are typically absent in epidemiological studies and small-scale field experiments. For some interventions (some forms of promoting condoms or marriage), the quantitative exercise suggests that these effects may increase HIV prevalence, while for others (such as male circumcision or increased incomes) they strengthen the effectiveness of the intervention. The underlying channels giving rise to these effects are discussed in detail.
This paper confirms some of the results of my research with Douglas Gollin: general equilibrium effects are important, behavioral responses are very important, and protection methods may be useless, or in this case counter-productive, once behavioral responses are taken into account. I also think that this is another example where the lack of reliable data can be efficiently supplemented with good use of theory.