Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2012:7: What doesn't kill you makes you stronger? The Impact of the 1918 Spanish Flu Epidemic on Economic Performance in Sweden

Martin Karlsson (), Therese Nilsson () and Stefan Pichler ()
Additional contact information
Martin Karlsson: Technische Universität Darmstadt, Postal: Technische Universität Darmstadt , Marktplatz 15 - Residenzschloss, 64283 Darmstadt, Germany
Therese Nilsson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Stefan Pichler: Technische Universität Darmstadt, Postal: Technische Universität Darmstadt , Marktplatz 15 - Residenzschloss, 64283 Darmstadt, Germany

Abstract: We study the impact of the 1918 influenza pandemic on economic performance in Sweden. The pandemic was one of the severest and deadliest pandemics in human history, but it has hitherto received only scant attention in the economic literature despite important implications for modern-day pandemics. In this paper, we exploit seemingly exogenous variation in incidence rates between Swedish regions to estimate the impact of the pandemic. Using difference in-differences and high-quality administrative data from Sweden, we estimate the effects on earnings, capital returns and poverty. We find that the pandemic led to a significant increase in poverty rates. There is also relatively strong evidence that capital returns were negatively affected by the pandemic. On the other hand, we find robust evidence that the influenza had no discernible effect on earnings. This finding is surprising since it goes against most previous empirical studies as well as theoretical predictions.

Keywords: Spanish Flu; Difference-in-Differences

JEL-codes: I18; J31; O40

58 pages, March 30, 2012

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