Longer-Run Economic Consequences of Pandemics

Abstract

What are the medium-to long-term effects of pandemics? How do they differ from other economic disasters? We study major pandemics using the rates of return on assets stretching back to the 14th century. Significant macroeconomic after-effects of pandemics persist for decades, with real rates of return substantially depressed, in stark contrast to what happens after wars. Our findings are consistent with the neoclassical growth model: capital is destroyed in wars, but not in pandemics; pandemics instead may induce relative labor scarcity and/or a shift to greater precautionary savings.

Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?

“…None of these papers focus on demand shortages or feature multiple sectors. Jorda et al (2020) provide some time-series evidence from historical pandemics on the impact on rates of return. The pandemics they study are persistent, with large numbers casualties.They find evidence that pandemics reduce the real rate of interest.…”

Scarring Body and Mind: The Long-Term Belief-Scarring Effects of COVID-19

“…Common parameters listed in Table 1. Scenario-specic parameters are: Scenario 1:φ 2020 = 0.90 Scenario 2:φ 2020 = 0.95 pandemics have occurred before Jorda et al (2020) identify 12 pandemics (with greater than 100,000 deaths) going back to the 14th century. This raises the possibility that economic agents in 2019 had some awareness of these past tail events and believed that they could happen again.…”

“…Other papers share our focus on long-run eects. Jorda et al (2020) study rates of return on assets using a data-set stretching back to the 14th century, focusing on 15 major pandemics (with more than 100,000 deaths). Their evidence suggests a sustained downward pressure on interest rates, decades after the pandemic, consistent with long-lasting macroeconomic aftereects.…”

COVID-Induced Economic Uncertainty

“…On complexities arising from highly uneven supply-side disruptions caused by a major pandemic, see Guerrieri et al (2020). On potential medium-and long-term macroeconomic consequences, see Barro, Ursua and Weng (2020) and Jorda, Singh and Taylor (2020).…”