Economic Effects of Pandemics Last Decades, Research Shows

(Bloomberg) --

The coronavirus pandemic could harm the economy for decades if past patterns are a guide, according to researchers drawing on data going back to the fourteenth century.

Looking at 12 major pandemics as well as armed conflicts, economists Oscar Jorda, Sanjay Singh and Alan Taylor at the University of California, Davis, concluded that they depress real rates, lead to small increases in real wages, and weigh on investment.

Real wages end up being slightly elevated due to labor scarcity, they said, and lower real rates will allow fiscal space for governments to mitigate the consequences.

“If the trends play out similarly in the wake of Covid-19 -- adjusted to the scale of this pandemic -- the global economic trajectory will be very different than was expected on a few weeks ago,” they wrote in a working paper. “Pandemics are followed by sustained periods -- over multiple decades -- with depressed investment opportunities.”

The major caveat identified by the economists is that past pandemics occurred at a time when virtually no members of society survived to old age. “The Black Death and other plagues hit populations with the great mass of the age pyramid below 60, so this time may be different,” they said.

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