“The 1918 Epidemic and a V-shaped Recession: Evidence from Municipal Income Data”

We combine high-quality vital statistics data with annual income data at the municipality level to study the economic aftermath of the 1918-influenza epidemic in Denmark. Controlling for pre-epidemic trends, we find that more severely affected municipalities experienced short-run declines in income, suggesting that the epidemic led to a V-shaped recession, with moderate, negative effects and a full recovery after a few years. Month-by-industry unemployment data show that unemployment rates were high during the epidemic, but decreased again a couple of months after the epidemic receded. The monthly evidence also indicates that part of the economic downturn in 1918 predates the epidemic.