Effects on the U.S. economy of a serious H1N1 epidemic: analysis with the USAGE model

Principal Investigator: Peter Dixon

Other Researchers: Maureen T. Rimmer, George Verikios


We analyse the economic effects of an H1N1 influenza epidemic that infects 90 million Americans, requiring 60 million to seek medical attention with 5 million being hospitalized and 350,000 deaths.  We assume that the epidemic is concentrated over a 6 month period in which it causes: (1) 65 per cent reductions in both inbound and outbound international tourism and business travel; (2) an upsurge in sick leave and widespread school closures requiring withdrawal of parents from the labor force leading to a loss of productivity of 1.05 per cent; (3) a 20 per cent surge in demand for hospital and other medical services; (4) a permanent reduction in the labor force of 0.18 per cent because of H1N1-related deaths; and (5) a 0.9 per cent reduction in the average propensity to consume associated with temporary cessation of large public gatherings, for example sporting events. Using USAGE, a detailed dynamic CGE model of the U.S., we find that these 5 sets of shocks would have the effects shown in Table 1.  These are quite severe at the height of the epidemic (peak quarter) and include a 4 per cent reduction in employment.  Averaged over the epidemic year the effects are considerably damped.  In the year following the epidemic, the macroeconomic effects are slightly positive.  By reducing wage rates, the epidemic improves the competitive position of the U.S. economy at the start of the post-epidemic year.