Unsafe sex,AIDS and development

The AIDS-fighting communities have spent their limited resource on improving people’s awareness of the risk of contracting AIDS, and yet these programs have not resulted in sustained behavior change. This paper offers a possible explanation of why agents in poor countries choose to engage in more unsafe sexual activities when they are perfectly cognizant of the risk involved. It is shown that agents may rationally choose to do so when they are poor, since future is not attractive due to poverty and agents care more about current-period utility. Our results indicate that safe sexual practice is essentially a “normal good” and that development may be key to reduce the HIV infectivity by modifying agents’ sexual behavior. The model is then extended to consider the role of public health expenditure. We find that the relationship between protected sexual activity and development is no longer monotonic: unsafe sexual activity may increase slightly after a critical level of development has been reached. Finally, we examine the impacts of AIDS on development by considering individual’s saving decision. It is shown that agents tend to save more and accumulate more capital when economy grows.