The 1918 Flu Pandemic Hit GDP Hard: Economists

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.

Resources

• 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.