The Macroeconomic Impact of the 1918–19 Influenza Pandemic in Sweden

Obrizan, Maksym and Karlsson, Martin and Matvieiev, Mykhailo (2020): The Macroeconomic Impact of the 1918–19 Influenza Pandemic in Sweden.

Abstract

What is the economic cost in the medium to long run of an epidemic that kills a large part of the labor force? To answer this question we build an overlapping generations model and calibrate it to the Swedish economy before the 1918–19 influenza pandemic. In the medium run the epidemic, which reduced the population by 0.66%, produces a modest increase in per capita consumption of survivors by 0.45%; however, the benefits are unevenly spread across cohorts. We also find that aggregate labor supply responds elastically while aggregate consumption and investment respond inelastically to the population decline. The aggregate consumption, for example, reduces by 0.27% only for each percentage point decrease in population over the following 10 years. Finally, we document that in the long run, the epidemic has a large cumulative effect over the following century.

• Item Type: MPRA Paper
• Language: English
• Keywords: Epidemics, Overlapping Generations Models
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; I - Health, Education, and Welfare > I1 - Health > I15 - Health and Economic Development

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