Measuring the Spanish Flu’s Economic Impact Using Historical Macroeconomic Statistics

The Spanish Flu epidemic of 1918-19 is the closest historical parallel to today’s Coronavirus pandemic. Its demographic aspects have been studied in detail, but the huge economic losses of Coronavirus have motivated researchers to pin down the economic costs of the Spanish Flu. The growing literature focuses on the US and uses city and state data to extract its costs with contradictory results. This paper uses historical statistics on GDP and industrial production to assess the economic costs of the Spanish Flu on the US, European, and UK economies. We find relatively small economic effects with the possible exception of the UK. Pandemics affect economic activity through human capital losses, voluntary changes in behavior to avoid infection, and state-decreed measures. The first two channels can produce economic effects similar to a substantial recession, but the third channel is required for the enormous economic losses we face today.