How do major pandemics affect economic activity in the longer term? My colleagues (Òscar Jordà, Alan Taylor) and I have a new working paper where we answer this question.
#coronavirus #COVID19 #CoronavirusPandemic #BlackDeath #SpanishFlu #SecularStagnation #NaturalRate
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#coronavirus #COVID19 #CoronavirusPandemic #BlackDeath #SpanishFlu #SecularStagnation #NaturalRate
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Findings consistent with what economic theory prescribes? Yes. Real returns down, real wages up….
Paper here: ssingh.ucdavis.edu/uploads/1/2/3/…
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Paper here: ssingh.ucdavis.edu/uploads/1/2/3/…
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We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 12 major pandemic episodes where more than 100,000 people died. We estimate the impulse response of the European real natural rate to a pandemic episode up to 40 years out
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Results: Pandemics have effects that last for decades. Following a pandemic, the natural rate declines for decades thereafter, reaching its nadir about 20 years later. (At the same time, real wages rise.)
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At the nadir, the natural rate is about 2% lower had the pandemic not taken place. Four decades later, the natural rate returns to the level it would be expected to have had the pandemic not taken place. In contrast, the natural rate rises after major armed conflicts.
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Comments and suggestions welcome. Thank you!
