Monday, April 28, 2008

1. Introduction

In a matter of decades, the AIDS pandemic has left more than 25 million dead, thereby threatening national economic security and destroying traditional family and societal structures. In the West, availability and affordability of antiretroviral medications, surrounding medical care, and prevention mechanisms like sexual health education and social counseling, have allowed society to keep transmission levels relatively low and transform HIV from a death sentence into a chronic, manageable illness. However across the globe AIDS continues to cause early death in communities who lack access to these services.

Powerful nations and international organizations have responded to the crisis of HIV/AIDS with foreign aid earmarked for AIDS programs, providing health services like those that have reduced HIV rates in the West. Aggregate “AIDS-aid” from major donors has increased notably from a commitment of $200 million in 1986 to $8.9 billion in 2005.

Yet AIDS continues to ravage the globe. Are committed financial resources falling short of actual need, or is aid destined to fail within the current system of aid distribution? Boone, Alesina, Burnside, Dollar, Easterly, Stiglitz, and many other scholars agree that foreign aid alone will not solve the problems of the poor. I argue, by extension, that aid alone will also not solve the AIDS pandemic. This paper examines the effect of AIDS-aid financing on changes in HIV rates in recipient nations. I argue that AIDS-aid is only effective in decreasing HIV rates if the recipient nation upholds certain policies that allow aid to be spent effectively. I test for a selection bias that determines who receives aid to examine the possibilities that aid is endogenous to change in HIV rates, and that aid recipients could have been worse off without aid.

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