In an NBER working paper published in March 2016, Summers, Fan and Jamison explore how each year a small likelihood exists that the world will again suffer an influenza pandemic akin to the catastrophic one of 1918. Even a moderately severe pandemic could lead to 2 million or more excess deaths.
World Bank and other work has assessed the probable income loss from a pandemic at 4-5% of global GNI. The economics literature points to a very high intrinsic cost of mortality risk, a value that GNI fails to capture. In this paper we generate an estimate of pandemic cost that is inclusive of both income loss and the cost of elevated mortality. We present results on an expected annual basis using reasonable (although highly uncertain) estimates of annual pandemic probability. We find:
- Expected pandemic deaths exceed 700,000 per year worldwide with an associated annual mortality cost of estimated at $490 billion. Our estimate of expected income loss is $80 billion per year and hence the inclusive cost would be $570 billion per year or 0.7% of global income (range: 0.4-1.0%).
- For moderately severe pandemics about 40% of inclusive cost results from income loss. For severe pandemics this fraction declines to 12%.
- The estimates of mortality cost as a % of GNI range from around 1.6% in lower-middle income countries down to 0.3% in high-income countries.
- The distribution of pandemic severity has an exceptionally fat tail: about 95% of the expected cost results from pandemics that would be expected to kill over 7 million people worldwide.