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The Redistributive Effects of Pandemics: Evidence of the Spanish Flu

Basco, Sergi, Domenech, Jordi and Roses, Joan R. (2020) The Redistributive Effects of Pandemics: Evidence of the Spanish Flu. Department of Economic History Working papers Working Papers 2020 (308). London School of Economics and Political Science.

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Abstract

This paper examines the impact of a pandemic in a developing economy. Measured by excess deaths relative to the historical trend, the 1918 influenza in Spain was one of the most intense in Western Europe. However, aggregate output and consumption were only mildly affected. In this paper we assess the impact of the flu by exploiting within-country variation in “excess deaths” and we focus on the returns to factors of production. Our main result is that the effect of flu-related “excess deaths” on real wages is large, negative, and short-lived. The effects are heterogeneous across occupations, from null to a 15 per cent decline,concentrated in 1918. The negative effects are exacerbated in more urbanized provinces. In addition, we do not find effects of the flu on the returns to capital. Indeed, neither dividends nor real estate prices (houses and land) were negatively affected by flu-related increases in mortality. Our interpretation is that the Spanish Flu represented a negative demand shock that was mostly absorbed by workers, especially in more urbanized regions.

Item Type: Monograph (Working Paper)
Official URL: http://www.lse.ac.uk/Economic-History/Working-Pape...
Additional Information: © 2020 The Author(s)
Divisions: Economic History
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
I - Health, Education, and Welfare > I0 - General > I00 - General
N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N10 - General, International, or Comparative
N - Economic History > N3 - Labor and Consumers, Demography, Education, Health, Income, and Wealth > N30 - Economic History: Labor and Consumers, Demography, Education, Health, Income and Wealth: General, International, or Comparative (Migration)
Date Deposited: 27 May 2020 14:57
Last Modified: 27 Jun 2020 23:19
URI: http://eprints.lse.ac.uk/id/eprint/104605

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