Working Paper: CEPR ID: DP15997
Authors: David Bloom; Michael Kuhn; Klaus Prettner
Abstract: We discuss and review literature on the macroeconomic effects of epidemics and pandemics since the late 20th century. First, we cover the role of health in driving economic growth and well-being and discuss standard frameworks for assessing the economic burden of infectious diseases. Second, we sketch a general theoretical framework to evaluate the tradeoffs policymakers must consider when addressing infectious diseases and their macroeconomic repercussions. In so doing, we emphasize the dependence of economic consequences on (i) disease characteristics; (ii) inequalities among individuals in terms of susceptibility, preferences, and income; and (iii) cross-country heterogeneities in terms of their institutional and macroeconomic environments. Third, we study pharmaceutical and nonpharmaceutical policies aimed at mitigating and preventing infectious diseases and their macroeconomic repercussions. Fourth, we discuss the health toll and economic impacts of five infectious diseases: HIV/AIDS, malaria, tuberculosis, influenza, and COVID-19. Although major epidemics and pandemics can take an enormous human toll and impose a staggering economic burden, early and targeted health and economic policy interventions can often mitigate both to a substantial degree.
Keywords: pandemics; epidemics; economic burden of disease; economic growth; macroeconomic models; health inequality; welfare; human capital; health policy
JEL Codes: D15; D58; E10; E20; I12; I15; I18; I31; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improvements in health (I14) | Greater supply of productive labor (J20) |
| Improvements in health (I14) | Higher incomes (J39) |
| Improvements in health (I14) | Increased human capital accumulation (J24) |
| 10-percentage-point increase in adult survival rates (I14) | Significant increase in aggregate labor productivity (O49) |
| Health improvements (I14) | Higher savings and investment (E21) |
| Health improvements (I14) | Longer planning horizons (D25) |
| Health improvements (I14) | Lower fertility rates (J13) |
| Lower fertility rates (J13) | Initiation of educational investments (I26) |
| Lower fertility rates (J13) | Demographic dividends (J19) |
| Health shocks (I12) | Perpetuation of poverty traps (I32) |
| Health shocks (I12) | Hinder economic development (O55) |
| Early and targeted health interventions (I14) | Mitigation of human and economic tolls of infectious diseases (H84) |
| Containment measures that save lives (H12) | Potential economic constraints (D24) |
| Potential economic constraints (D24) | Adverse outcomes, including starvation in vulnerable populations (I32) |