In this paper, a simple general equilibrium model is developed to capture the impact of AIDS on economic development. To this end, a benchmark model due to Cuddington and Hancock (1994) is extended in various directions. In particular, the sharply declining life expectancy patterns are clearly reflected in the enlarged model through a generic Ben Porath mechanism. AIDS-related health expenditures are incorporated as well. The model applied to South Africa shows that while a relatively short term assessment might not reveal any dramatic AIDS growth effect, the medium/long run impact can be truly devastating. In particular, the heavy trends in mortality and life expectancy currently induced by AIDS are shown to be potentially at least twice more detrimental for per capita economic growth in the period 2020-2030 compared to 2000-2010.
