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The Macroeconomic Impact of the 1918–19 Influenza Pandemic in Sweden

  • Martin Karlsson , Mykhailo Matvieiev und Maksym Obrizan ORCID logo EMAIL logo
Veröffentlicht/Copyright: 22. April 2022
The B.E. Journal of Macroeconomics
Aus der Zeitschrift The B.E. Journal of Macroeconomics Band 23 Heft 2

Abstract

In this paper, we develop an overlapping generations model with endogenous fertility and calibrate it to the Swedish historical data in order to estimate the economic cost of the 1918–19 influenza pandemic. The model identifies survivors from younger cohorts as main benefactors of the windfall bequests following the influenza mortality shock. We also show that the general equilibrium effects of the pandemic reveal themselves over the wage channel rather than the interest rate, fertility or labor supply channels. Finally, we demonstrate that the influenza mortality shock becomes persistent, driving the aggregate variables to lower steady states which costs the economy 1.819% of the output loss over the next century.

Keywords: epidemics; overlapping generations models; 1918–19 influenza; endogenous fertility
JEL Classification: I15; E21
Corresponding author: Maksym Obrizan, Kyiv School of Economics, Shpaka Str 3, Kyiv 03113, Ukraine, Email:

Acknowledgement

We would like to thank the editor Tiago Cavalcanti and an anonymous referee for many helpful suggestions that helped to improve the paper. All remaining errors are ours.

Appendix
Table A1:

Calibration inputs.

Cohorts
10–20 20–30 30–40 40–50 50–60 60–70 70–80 All
Population, male 582,195 458,157 358,275 274,301 223,427 155,228 106,211 2,157,794
Population, female 544,381 468,887 403,062 320,476 303,422 229,936 200,276 2,470,440
LFPR, male 0.250 0.825 0.897 0.898 0.869 0.723 0.362 0.665
LFPR, female 0.131 0.396 0.229 0.187 0.167 0.130 0.099 0.206
Workers, male 145,612 378,122 321,521 246,576 194314 112257 38499 1,436,901
Workers, female 71,571 185,712 92,455 60,209 50,959 29,897 19,963 510,766
Average labor earnings, male, SEK 1501 2394 3618 4122 4136 3541 3207 3220
Average labor earnings, female, SEK 1172 1560 2023 2323 2549 2972 3015 1917
Per capita labor earnings, SEK 268 1289 1774 1944 1772 1263 599 1210
Normalized bill 0.222 1.064 1.464 1.605 1.463 1.042 0.495 1

  1. Data for Population before the pandemic are taken from Karlsson, Nilsson, and Pichler (2014). The number of workers is calculated based on the LFPR taken from Census 1920 (Statistics Sweden 1927). Average labor earnings are taken from Census 1920.

Table A2:

Fertility rates.

Years
1918 1928 1938 1948 1958 1968 1978 1988 1998 2008
10–20 8.79 8.88 13.12 19 20.93 15.865 6.78 5.36 3.21 2.572
20–30 115.485 87.775 116.84 130.345 140.31 122.805 106.8 109.65 78.235 80.277
30–40 108.39 71.915 81.945 70.445 62.58 46.17 52.025 72.17 81.275 99.877
40–50 27.46 15.355 12.54 9.16 5.81 2.675 2.52 3.645 4.855 7.311

  1. Fertility rates per 1,000 women from official sources from (Statistics Sweden 1927, 2009, 2018) aggregated into cohorts.

Figure A1: Adjustment in the number of newborns after the flu. Plots depict percentage deviation from the steady state value. Dashed line shows the counterfactual scenario of uniform mortality across cohorts. Dotted line shows the scenario with constant fertility.
Figure A1:

Adjustment in the number of newborns after the flu.

Plots depict percentage deviation from the steady state value. Dashed line shows the counterfactual scenario of uniform mortality across cohorts. Dotted line shows the scenario with constant fertility.

Figure A2: Adjustment of investment-output, consumption-output ratios and factor payments after the flu. Plots depict percentage deviation from the steady state value. Dashed line shows the counterfactual scenario of uniform mortality across cohorts. Dotted line shows the scenario with constant fertility.
Figure A2:

Adjustment of investment-output, consumption-output ratios and factor payments after the flu.

Plots depict percentage deviation from the steady state value. Dashed line shows the counterfactual scenario of uniform mortality across cohorts. Dotted line shows the scenario with constant fertility.

Figure A3: OLG model predictions versus the results in Karlsson, Nilsson, and Pichler (2014). The round markers represent the effects estimated by Karlsson, Nilsson, and Pichler (2014) and their confidence intervals calculated as the parameter estimate multiplied by the overall mortality rate in the. The diamond markers represent the deviation from the pre-pandemic steady state according to our OLG model.
Figure A3:

OLG model predictions versus the results in Karlsson, Nilsson, and Pichler (2014).

The round markers represent the effects estimated by Karlsson, Nilsson, and Pichler (2014) and their confidence intervals calculated as the parameter estimate multiplied by the overall mortality rate in the. The diamond markers represent the deviation from the pre-pandemic steady state according to our OLG model.

Figure A4: Decomposition of various effects on per capita output.
Figure A4:

Decomposition of various effects on per capita output.

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Received: 2021-01-21
Revised: 2021-10-15
Accepted: 2022-02-17
Published Online: 2022-04-22

© 2022 Walter de Gruyter GmbH, Berlin/Boston

Artikel in diesem Heft

  1. Frontmatter
  2. Advances
  3. The Macroeconomic Impact of the 1918–19 Influenza Pandemic in Sweden
  4. Aggregate Costs of a Gender Gap in the Access to Business Resources
  5. The Macroeconomic Effects of Shadow Banking Panics
  6. Wealth Inequality and the Exploration of Novel Technologies
  7. Contributions
  8. Learning, Central Bank Conservatism, and Stock Price Dynamics
  9. Progressive Taxation and Robust Monetary Policy
  10. The New Keynesian Phillips Curve and Imperfect Exchange Rate Pass-Through
  11. The Macroeconomic Impact of Social Unrest
  12. Interest Rates, Money, and Fed Monetary Policy in a Markov-Switching Bayesian VAR
  13. Un-Incorporation and Conditional Misallocation: Firm-Level Evidence from Sri Lanka
  14. Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism
  15. Open Economy Neoclassical Growth Models and the Role of Life Expectancy
https://doi.org/10.1515/bejm-2021-0018
Schlagwörter für diesen Artikel
epidemics; overlapping generations models; 1918–19 influenza; endogenous fertility

Artikel in diesem Heft

  1. Frontmatter
  2. Advances
  3. The Macroeconomic Impact of the 1918–19 Influenza Pandemic in Sweden
  4. Aggregate Costs of a Gender Gap in the Access to Business Resources
  5. The Macroeconomic Effects of Shadow Banking Panics
  6. Wealth Inequality and the Exploration of Novel Technologies
  7. Contributions
  8. Learning, Central Bank Conservatism, and Stock Price Dynamics
  9. Progressive Taxation and Robust Monetary Policy
  10. The New Keynesian Phillips Curve and Imperfect Exchange Rate Pass-Through
  11. The Macroeconomic Impact of Social Unrest
  12. Interest Rates, Money, and Fed Monetary Policy in a Markov-Switching Bayesian VAR
  13. Un-Incorporation and Conditional Misallocation: Firm-Level Evidence from Sri Lanka
  14. Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism
  15. Open Economy Neoclassical Growth Models and the Role of Life Expectancy
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