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The 1918 Flu Pandemic Hit GDP Hard: Economists

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U.S. life insurers seem to have sailed past the catastrophic 1918 “Spanish flu” influenza pandemic without much serious damage.

The pandemic killed about 0.5% of all of the people who were living in the United States at that time, and it was especially hard on working-age people. A pandemic that killed 0.5% of U.S. residents today would produce a U.S. death toll of about 1.6 million.

The big U.S. life insurers were all able to pay their 1918 death claims, and many were able to maintain their dividend payment rates. Many advertised in trade papers about efforts to open offices and hire agents.

But three researchers — Robert Barro, José Ursúa and Joanna Weng — contend in a new working paper that, from 1918 through 1921, in the typical country, flu-mortality-related was terrible for gross domestic product (GDP), or national income.


  • A copy of the 1918 pandemic impact article is available here.
  • An article about how U.S. life insurers handled the 1918 flu pandemic is available here.

Barro and his colleagues estimate in the working paper, which is available on the National Bureau of Economic Research website, that, for a typical country, an economist could multiply the 1918-1920 flu death rate by 3 to estimate the flu-related reduction in the country’s GDP, and that an economist could multiply the flu death rate by 4 to estimate the flu-related impact on consumption.

In the United States, for example, the flu death rate was about 0.5%, or one death for every 200 residents.

That means that, in the United States, the flu pandemic probably cut U.S. GDP by about 1.5% and consumption by about 2.1%, the economists estimate.

The pandemic killed about 2% of all the people who were alive in the world at that time. It probably cut total world GDP by about 6%, and total world consumption by about 8%, Barro and his colleagues estimate.

A working paper is a research paper that has not yet been through a full peer review process.

Barro and his colleagues came up with their estimates by analyzing the interactions between flu mortality data, World War I mortality data, and historical economic statistics, for 43 countries, for the period from 1918 through 1920.

The researchers say they conducted the analysis to get an idea of how the COVID-19 pandemic might affect the world economy.

The researchers note that 1918-1920 flu mortality peaked at just 0.3% in Australia, which responded to the pandemic with a tight quarantine, and climbed over 4% in the country with the worst death rate peak during the period, India.

The researchers tried to filter out the effects of World War I on GDP effects by adjusting the flu impact estimates for each country’s World War I military combat death rate.

The researchers also looked at inflation. They found that the average impact of the pandemic on a country’s inflation rate amounted to 10.1 times the flu death rate.

In the United States, for example, with a 0.5% flu death rate, the flu might have increased the inflation rate by about 5 percentage points, Barro and his colleagues estimate.

“The large potential losses in lives and economic activity justify substantial expenditure of resources to attempt to limit the damage,” the researchers conclude.

— Read Warren Probes Biggest Banks on Coronavirus Exposureon ThinkAdvisor.

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