Findings of the original paper by Correia and al. (2020)
Correia and al. study the economic effects of the largest influenza pandemic in U.S. history, the 1918 Flu Pandemic. They exploit spatial variation in both the severity of the pandemic, as well as the speed and intensity of non-pharmaceutical interventions (NPIs) implemented to fight disease transmission. NPIs implemented in 1918 resemble many of the policies used to reduce the spread of COVID-19, including school, theater, and church closures, public gathering and funeral bans, quarantine of suspected cases, and restricted business hours. Their main finding:
- Cities that intervened earlier and more aggressively experience a relative increase in real economic activity after the pandemic.
As can be seen in the figure below, cities that implemented stricter NPIs (green dots) tend to be clustered in the upper-left region (low mortality, high growth), while cities with more lenient NPIs (red dots) are clustered in the lower-right region (high mortality, low growth). This suggests that NPIs play a role in attenuating mortality, but without reducing economic activity. If anything, cities with stricter NPIs during the pandemic perform better in the year after the pandemic.
Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu
Authors: Sergio Correia, Stephan Luck, and Emil Verner
From: Federal Reserve Board, Federal Reserve Bank of New York, MIT
NPIs had no effect on subsequent economic growth – the Lilley and al. (2020) paper
The five most influential observations on the top right all have longer than median NPIs, and are located west of the Mississippi River. Does that suggest that spatial correlation of errors may pose an additional issue for inference?
Lilley and al. tried to replicate the results of the Correia and al. paper. They collected additional data to extend their sample from 1899 to 1927. By extending the sample backwards, it seems that the headline results of the Correia and al. paper are driven by pre-existing differential growth patterns across US cities. In particular, Lilley and al. find that:
- NPIs in 1918 explain growth between 1899 and 1914 just as well as 1914 to 1919 growth;
- The 1914-1919 growth result is mostly driven by estimated city level population growth that happened from 1910-1917;
- Most importantly, NPIs on economic growth are a noisy zero; they can neither rule out substantial positive nor negative effects of NPIs on employment growth.
Public Health Interventions and Economic Growth: Revisiting The Spanish Flu Evidence
Author: Andrew Lilley, Matthew Lilley, Gianluca Rinaldi
From: Harvard University
