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 mortality rates because of the 1918 influenza epidemic 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.