The 1918 epidemic and a V-shaped recession: Evidence from historical tax records

We exploit high-quality vital statistics data and annual income data, obtained from historical municipality tax records, to study the economic aftermath of the 1918-influenza epidemic in Denmark. We find that average income followed a V-shaped path from 1917 to 1919 and (if anything) municipalities with higher 1918-influenza mortality rates experienced more pronounced declines and recoveries. In addition, national 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. Evidence from the Danish stock market exchange also indicates that the epidemic only had short-lived effects on the economy.