Epidemics and Economics

• Author: David E. Bloom, Daniel Cadarette, and JP Sevilla
• Pages: 46-49

46 FINANCE & DEVELOPMENT | June 2018

I

nfectious disea ses and associated mortalit y have

abated, but they remain a signi cant threat

throughout the world. We continue to ght

both old pathogens, such as the plag ue, that have

troubled humanity for millenn ia and new pathogens,

such as human immunode ciency virus (HIV ), that

have mutated or spilled over from animal reser voirs.

Some infectious disea ses, such as tuberculosis

and malaria , are endemic to many areas, imposing

substantial but steady burdens. Ot hers, such as

inuenza, uctuate in pervasiveness and intensity,

wreaking h avoc in developing and developed econ-

omies alike when an outbreak (a sharp increase in

prevalence in a relatively limited are a or population),

an epidemic (a sharp increase covering a l arger area

or population), or a pandemic (an epidemic covering

multiple countries or continents) occurs.

e health risks of outbreak s and epidemics—

and the fear and pan ic that accompany them—map

to various economic risks.

First, and perhaps most obviously, there are the

costs to the health sy stem, both public and private,

of medical treatment of the infec ted and of out-

break control. A sizable outbreak can over whelm

the health system, li miting the capacity to deal with

routine health issues and compound ing the prob-

lem. Beyond shocks to the health sec tor, epidemics

force both the ill and thei r caretakers to miss work

or be less eective at their jobs, driv ing down and

disrupting productivit y. Fear of infection can re sult

in social dista ncing or closed schools, enterprises,

commercial establishments, transportation, and

public services— all of which disrupt economic

and other socially va luable activity.

Concern over the spread of even a relatively con-

tained outbreak can lead to decreased trade. For

example, a ban imposed by the European Union

on exports of British beef laste d 10 years following

identication of a mad cow disease outbrea k in

the United Kingdom, despite relatively low trans-

mission to humans. Travel and tourism to regions

aected by outbreaks a re also likely to decline. Some

long-running epidemics, such as H IV and malaria,

deter foreign direct investment as wel l.

e economic risks of epidemics are not trivial.

Victoria Fan, Dean Jamison, and Law rence Summers

recently estimated the ex pected yearly cos t of pan-

demic inuenza at roughly $500 bill ion (0.6 percent

of global income), including both lost income and

the intrinsic cost of elevated morta lity. Even when

the health impact of an outbreak is rel atively limited,

its economic consequences can quick ly become

magnied. Liberi a, for example, saw GDP growth

decline 8 percentage points from 2013 to 2014

during the recent Ebola outbreak in west A frica,

even as the country’s overall deat h rate fell over

the same period.

e consequences of outbreaks and epidemics a re

not distributed equally th roughout the economy.

Some sectors may even benet nancia lly, while

others will suer d isproportionately. Pharmaceutica l

companies that produce vaccines, antibiotics, or

other products needed for outbreak response are

potential beneciaries. Hea lth and life insura nce

companies are likely to be ar heavy costs, at lea st

in the short term, as are livestock producers in the

event of an outbreak linked to ani mals. Vulnerable

populations, particu larly the poor, are likely to suer

New and resurgent infectious diseases can have far-reaching economic repercussions

David E. Bloom, Daniel Cadarette, and JP Sevilla

EPIDEMICS & ECONOMICS