USC Price School of Public Policy

Publication Spotlight: Faculty examine economic consequences of an influenza pandemic

Adam Rose

Adam Rose

Dan Wei

Dan Wei

The influenza virus’s impact on our health is varied, potentially fatal, and well-documented. What is less well understood is the impact of an influenza pandemic on our economy. Price Professors Adam Rose and Dan Wei, along with their colleague Fynnwin Prager Ph.D. ’13, sought to change that. In a May 2016 publication in the journal Risk Analysis titled, “Total Economic Consequences of an Influenze Outbreak in the United States,” the three authors devised a model to quantify influenza’s myriad pathways to economic disruption. The model they developed will be part of an ongoing effort to enhance the capabilities of the U.S. National Biosurveillance Integration Center (NBIC) to combat a range of biothreats.

In contrast with seasonal influenza to which many have some immunity, an influenza pandemic—because of its relative rarity— has the potential to cause catastrophic human loss. For example, the 1918 influenza pandemic in the United States led to the deaths of between 20 and 100 million people. Even less deadly strains of influenza have the potential to significantly curtail economic output. In addition to those directly affected and removed from the workforce due to illness, influenza influences other citizen to change their behavior in ways that damage commerce. They avoid large gatherings, they cut out travel, they stop attending class, they escape public transportation, and they collectively increase the resources allotted to medical expenditures.

To gain a better understanding of the economic impact of changes in these variables and others, the authors used a computable general equilibrium (CGE) model, an econometric tool frequently applied to disaster measurement, because of its effectiveness in tracking behavioral responses and capturing population resilience. Using data obtained from the Centers for Disease Control (CDC), the authors simulated the economic outcomes resulting from varied seasonal and pandemic influenzas, vaccination rates, population resiliency, and behavioral adaptations.

Defining the flu’s severity and using established parameters for behavioral cost, the authors find that seasonal influenza reduces U.S. gross domestic product (GDP) by $8.92 billion if the population isn’t vaccinated and by $6.99 billion if it is. In contrast, the authors find that during an influenza pandemic GDP would be reduced by $45.32 billion if the population isn’t vaccinated and by $34.3 billion if it is. Examining individual sectors, the authors find severe impacts on air transport, entertainment, and hotels and restaurants while medical services is, not surprisingly, positively impacted. Interestingly, the authors also found that population resiliency—the ability of firms to alter behavior to recoup production—is robust and a strong counterweight to the economic damages of avoidance behavior.

These findings suggest that preemptively designing effective public health campaigns and public messaging would be a wise investment to reduce lost productivity in the future. Similarly, partnering with businesses to devise smarter worker reentry and institute flexible production schedules would greatly reduce potential damages.

The full paper is available online: Total Economic Consequences of an Influenza Outbreak in the United States.