RIO DE JANEIRO, BRAZIL – The coronavirus pandemic could affect the economy for decades if past patterns serve as a guide, according to researchers who have drawn on data dating back to the 14th century.
In a study of 12 significant pandemics as well as armed conflict, economists Oscar Jorda, Sanjay Singh and Alan Taylor of the University of California at Davis concluded that pandemics reduce real interest rates, lead to small increases in real wages and weigh down investment.
Real wages show a slight increase due to labor shortages, they said, and lower real interest rates allow fiscal room for governments to mitigate economic impacts.
“If the trends follow the same patterns for the Covid-19, adjusted to the scale of this pandemic, the global economic trajectory will be very different from what was projected a few weeks ago,” they wrote in the study. “Pandemics are followed by continuous periods of limited investment opportunities over several decades”.
The main caveat noted by economists is that past pandemics occurred at a time when hardly any member of society survived to old age. “The Black Death and other plagues affected populations with the bulk of the pyramid under 60, so this time it may be different,” they said.