Jordà Òscar, Sanjay R. Singh, Alan M. Taylor: Longer-Run Economic Consequences of Pandemics, in: Federal Reserve Bank of San Francisco Working Paper 2020-09 (June 2020).
The authors ask how major pandemics affect economic activity in the medium to longer term and whether the effects are consistent with what economic theory suggests. Since pandemics are rare events, they collected historical evidence from many centuries. The authors have examined asset returns using a dataset dating back to the 14th century, focusing on 12 major pandemics in which more than 100,000 people died. They also included major armed conflicts, which claimed a similar number of lives. Substantial macroeconomic aftermath of the pandemics continued for about 40 years, with real rates of return having fallen significantly. In contrast, the authors state that wars do not have such effects, indeed the opposite. This is consistent with the destruction of capital that occurs in wars, but not in pandemics. Using more sparse data, they found that real wages were somewhat higher after pandemics. According to the authors, the results are consistent with pandemics inducing labour scarcity and/or a shift to greater precautionary savings.