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Supply-side Effects of Pandemic Mortality: Insights from an Overlapping-generations Model

Etienne Gagnon (), Johannsen Benjamin K. () and López-Salido David ()
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López-Salido David: Federal Reserve Board, 20th Street and Constitution Avenue NW, Washington, DC, 20551, USA

The B.E. Journal of Macroeconomics, 2022, vol. 22, issue 1, 1-21

Abstract: We use an overlapping-generations model to explore the implications of mortality during pandemics for the economy’s productive capacity. Under current epidemiological projections for the progression of COVID-19, our model suggests that mortality will have, in itself, only small effects on output and factor prices because projected mortality is small in proportion to the population and skewed toward individuals who are retired from the labor force. That said, we show that if the spread of COVID-19 is not contained, or if the ongoing pandemic were to follow a mortality pattern similar to the 1918–1920 Great Influenza pandemic, then the effects on the productive capacity would be economically significant and persist for decades.

Keywords: pandemics; potential output; real wage; equilibrium real interest rate; demographics (search for similar items in EconPapers)
JEL-codes: E21 E27 E43 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/bejm-2020-0196

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