Working Paper: CEPR ID: DP14543
Authors: Oscar Jorda; Sanjay R. Singh; Alan M. Taylor
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 pandemicspersist for about 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.
Keywords: pandemics; wars; depressions; real interest rate; natural rate; local projections
JEL Codes: E43; F41; N10; N30; N40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Pandemics (H84) | depressed real rates of return on assets (G19) |
| Pandemics (H84) | decline in natural rate of interest (E43) |
| Pandemics (H84) | elevated real wages (J39) |
| Wars (D74) | elevated real interest rates (E43) |
| Pandemics (H84) | labor scarcity (J23) |
| labor scarcity (J23) | elevated real wages (J39) |
| Pandemics (H84) | natural rate of interest declines for decades (E43) |
| natural rate of interest declines for decades (E43) | depressed real rates of return on assets (G19) |