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The possible macroeconomic impact on the UK of an influenza pandemic

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  • Simon Wren-Lewis
  • Marcus Keogh-Brown

Abstract

Little is known about the possible impact of an influenza pandemic on a nation's economy.� We applied the UK macroeconomic model 'COMPACT' to epidemiological data on previous UK influenza pandemics, and extrapolated a sensitivity analysis to cover more extreme disease scenarios.� Analysis suggests that the economic impact of a repeat of the 1957 or 1968 pandemics, allowing for school closures, would be short lived, constituting a loss of 3.35% and 0.58% of GDP in the first pandemic quarter and year respectively.� A more severe scenario (with more than 1% of the population dying) could yield impacts of 21% and 4.5% respectively.� The economic shockwave would be gravest when absenteeism (through school closures) increases beyond a few weeks, creating policy repercussions for influenza pandemic planning as the most severe economic impact is due to policies to contain the pandemic rather than the pandemic itself.� Accounting for changes in consumption patterns made in an attempt to avoid infection worsens the potential impact.� Our mild disease scenario then shows first quarter/first year reductions in GDP of 9.5%/2.5%, compared to our severe scenario reductions of 29.5%.� These results clearly indicate the significance of behavioural change over disease parameters.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 431.

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Date of creation: 01 May 2009
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Handle: RePEc:oxf:wpaper:431

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Keywords: Pandemic; Influenza; Simulation; COMPACT;

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  1. A Garratt & K Lee & M Pesaran & Yongcheol Shin, 2004. "A long run structural macroeconometric model of the UK," ESE Discussion Papers 35, Edinburgh School of Economics, University of Edinburgh.
  2. Keogh-Brown, Marcus Richard & Smith, Richard David, 2008. "The economic impact of SARS: How does the reality match the predictions?," Health Policy, Elsevier, vol. 88(1), pages 110-120, October.
  3. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  4. Jong-Wha Lee & Warwick J. McKibbin, 2004. "Globalization and Disease: The Case of SARS," Asian Economic Papers, MIT Press, vol. 3(1), pages 113-131.
  5. Smith, Richard D. & Yago, Milton & Millar, Michael & Coast, Jo, 2005. "Assessing the macroeconomic impact of a healthcare problem: The application of computable general equilibrium analysis to antimicrobial resistance," Journal of Health Economics, Elsevier, vol. 24(6), pages 1055-1075, November.
  6. Kenneth F. Wallis & Jan P. A. M. Jacobs, 2005. "Comparing SVARs and SEMs: two models of the UK economy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 209-228.
  7. Wren-Lewis, Simon, et al, 1996. "The Macroeconomic Effects of Fiscal Policy: Linking an Econometric Model with Theory," Economic Journal, Royal Economic Society, vol. 106(436), pages 543-59, May.
  8. Lars Jonung & Werner Roeger, 2006. "The macroeconomic effects of a pandemic in Europe - A model-based assessment," European Economy - Economic Papers 251, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  9. Werner B.F. Brouwer & Marc A. Koopmanschap, 2005. "The Friction-Cost Method: Replacement for Nothing and Leisure for Free?," PharmacoEconomics, Springer Healthcare | Adis, vol. 23(2), pages 105-111.
  10. Darby, Julia & Ireland, Jonathan & Leith, Campbell & Wren-Lewis, Simon, 1998. "COMPACT: a rational expectations, intertemporal model of the United Kingdom economy," Economic Modelling, Elsevier, vol. 16(1), pages 1-52, January.
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Cited by:
  1. Karlsson, Martin & Nilsson, Therese & Pichler, Stefan, 2012. "What doesn't kill you makes you stronger? The Impact of the 1918 Spanish Flu Epidemic on Economic Performance in Sweden," Working Papers 2012:7, Lund University, Department of Economics.
  2. George Verikios & James McCaw & Jodie McVernon & Anthony Harris, 2010. "H1N1 influenza in Australia and its macroeconomic effects," Centre of Policy Studies/IMPACT Centre Working Papers g-212, Monash University, Centre of Policy Studies/IMPACT Centre.

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