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Supply-side or demand-side? Assessing the economic impact of pandemics and wars on G7 countries since the 1800s

Author

Listed:
  • Donadelli, Michael
  • Mammi, Irene
  • Paradiso, Antonio

Abstract

We investigate the impact of major wars and pandemics on supply and demand dynamics in G7 economies since the 1800s. Using a neoclassical synthesis framework, we decompose real GDP per capita into trend (supply) and cyclical (demand) components via univariate filters and unobserved-components models. Country-specific local projections reveal that catastrophic events primarily and persistently damage the supply side, with wars causing large, long-lasting losses in productive capacity. Demand-side effects are generally smaller and more short-lived. However, no uniform G7 response exists; effects vary considerably in direction, magnitude, and persistence across countries. These differences are amplified by how shocks are measured-binary indicators versus intensity-based metrics-highlighting the importance of shock severity. By disentangling channels and incorporating heterogeneity, our analysis underscores the need for tailored, country-specific stabilization and reconstruction policies.

Suggested Citation

  • Donadelli, Michael & Mammi, Irene & Paradiso, Antonio, 2026. "Supply-side or demand-side? Assessing the economic impact of pandemics and wars on G7 countries since the 1800s," Journal of Economic Behavior & Organization, Elsevier, vol. 246(C).
    • Handle: RePEc:eee:jeborg:v:246:y:2026:i:c:s0167268126001265
    DOI: 10.1016/j.jebo.2026.107540
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    Keywords

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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
    • Y10 - Miscellaneous Categories - - Data: Tables and Charts - - - Data: Tables and Charts

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