The Redistributive Effects of Pandemics: Evidence on the Spanish Flu

42 Pages Posted: 20 May 2020

See all articles by Sergi Basco

Sergi Basco

Universitat Barcelona

Jordi Domenech

Universidad Carlos III de Madrid

Joan R. Rosés

London School of Economics & Political Science (LSE) - London School of Economics

Date Written: May 2020

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 percent 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.

Keywords: Pandemics, real wages, Returns to capital, Spanish flu

JEL Classification: E32, I00, N10, N30

Suggested Citation

Basco, Sergi and Domenech, Jordi and Rosés, Joan R., The Redistributive Effects of Pandemics: Evidence on the Spanish Flu (May 2020). CEPR Discussion Paper No. DP14753, Available at SSRN: https://ssrn.com/abstract=3603985

Sergi Basco (Contact Author)

Universitat Barcelona ( email )

Barcelona
Spain

Jordi Domenech

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

HOME PAGE: http://portal.uc3m.es/portal/page/portal/dpto_ciencias_sociales/home/faculty/Jordi%20Domenech

Joan R. Rosés

London School of Economics & Political Science (LSE) - London School of Economics ( email )

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