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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. Wren-Lewis, Simon, et al, 1996. "The Macroeconomic Effects of Fiscal Policy: Linking an Econometric Model with Theory," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(436), pages 543-59, May.
  2. Darby, Julia & Ireland, Jonathan & Leith, Campbell & Wren-Lewis, Simon, 1998. "COMPACT: a rational expectations, intertemporal model of the United Kingdom economy," Economic Modelling, Elsevier, Elsevier, vol. 16(1), pages 1-52, January.
  3. Lars Jonung & Werner Roeger, 2006. "The macroeconomic effects of a pandemic in Europe - A model-based assessment," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 251, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Garratt, A. & Lee, K. & Pesaran, M. H. & Shin, Y., 1998. "A Long-run Structural Macro-econometric Model of the UK," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9812, Faculty of Economics, University of Cambridge.
  5. Jong-Wha Lee & Warwick J. McKibbin, 2003. "Globalization and Disease: The Case of SARS," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 2003-16, The Australian National University, Arndt-Corden Department of Economics.
  6. Werner B.F. Brouwer & Marc A. Koopmanschap, 2005. "The Friction-Cost Method: Replacement for Nothing and Leisure for Free?," PharmacoEconomics, Springer Healthcare | Adis, Springer Healthcare | Adis, vol. 23(2), pages 105-111.
  7. Keogh-Brown, Marcus Richard & Smith, Richard David, 2008. "The economic impact of SARS: How does the reality match the predictions?," Health Policy, Elsevier, Elsevier, vol. 88(1), pages 110-120, October.
  8. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 1(1), pages 19-46, January.
  9. 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, Elsevier, vol. 24(6), pages 1055-1075, November.
  10. Warwick McKibbin & Alexandra Sidorenko, 2006. "Global Macroeconomic Consequences of Pandemic Influenza," CAMA Working Papers 2006-26, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  11. 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., John Wiley & Sons, Ltd., vol. 20(2), pages 209-228.
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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," Darmstadt Discussion Papers in Economics, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL) 57149, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  2. Fenichel, Eli P., 2013. "Economic considerations for social distancing and behavioral based policies during an epidemic," Journal of Health Economics, Elsevier, Elsevier, vol. 32(2), pages 440-451.
  3. Judith Kabajulizi, 2013. "Macroeconomic Implications Of Health Sector Reforms In Uganda: A Computable General Equilibrium Analysis," EcoMod2013 5158, EcoMod.
  4. 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, Victoria University, Centre of Policy Studies/IMPACT Centre.

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