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Epidemics and Economics

New and resurgent infectious diseases can have far-reaching economic repercussions

David E. Bloom, Daniel Cadarette, and JP Sevilla

Infectious diseases and associated mortality have abated, but they remain a significant threat throughout the world. We continue to fight both old pathogens, such as the plague, that have troubled humanity for millennia and new pathogens, such as human immunodeficiency virus (HIV), that have mutated or spilled over from animal reservoirs.

Some infectious diseases, such as tuberculosis and malaria, are endemic to many areas, imposing substantial but steady burdens. Others, such as influenza, fluctuate in pervasiveness and intensity, wreaking havoc in developing and developed economies alike when an outbreak (a sharp increase in prevalence in a relatively limited area or population), an epidemic (a sharp increase covering a larger area or population), or a pandemic (an epidemic covering multiple countries or continents) occurs.

The health risks of outbreaks and epidemics?and the fear and panic that accompany them?map to various economic risks.

First, and perhaps most obviously, there are the costs to the health system, both public and private, of medical treatment of the infected and of outbreak control. A sizable outbreak can overwhelm the health system, limiting the capacity to deal with routine health issues and compounding the problem. Beyond shocks to the health sector, epidemics force both the ill and their caretakers to miss work or be less effective at their jobs, driving down and disrupting productivity. Fear of infection can result in social distancing or closed schools, enterprises, commercial establishments, transportation, and public services?all of which disrupt economic and other socially valuable activity.

Concern over the spread of even a relatively contained outbreak can lead to decreased trade. For example, a ban imposed by the European Union on exports of British beef lasted 10 years following identification of a mad cow disease outbreak in the United Kingdom, despite relatively low transmission to humans. Travel and tourism to regions affected by outbreaks are also likely to decline. Some long-running epidemics, such as HIV and malaria, deter foreign direct investment as well.

The economic risks of epidemics are not trivial. Victoria Fan, Dean Jamison, and Lawrence Summers recently estimated the expected yearly cost of pandemic influenza at roughly $500 billion (0.6 percent of global income), including both lost income and the intrinsic cost of elevated mortality. Even when the health impact of an outbreak is relatively limited, its economic consequences can quickly become magnified. Liberia, for example, saw GDP growth decline 8 percentage points from 2013 to 2014 during the recent Ebola outbreak in west Africa, even as the country's overall death rate fell over the same period.

The consequences of outbreaks and epidemics are not distributed equally throughout the economy. Some sectors may even benefit financially, while others will suffer disproportionately. Pharmaceutical companies that produce vaccines, antibiotics, or other products needed for outbreak response are potential beneficiaries. Health and life insurance companies are likely to bear heavy costs, at least in the short term, as are livestock producers in the event of an outbreak linked to animals. Vulnerable populations, particularly the poor, are likely to suffer disproportionately, as they may have less access to health care and lower savings to protect against financial catastrophe.

Economic policymakers are accustomed to managing various forms of risk, such as trade imbalances, exchange rate movements, and changes in market interest rates. There are also risks that are not strictly economic in origin. Armed conflict represents one such example; natural disasters are another. We can think about the economic disruption caused by outbreaks and epidemics along these same lines. As with other forms of risk, the economic risk of health shocks can be managed with policies that reduce their likelihood and that position countries to respond swiftly when they do occur.

A daunting set of threats

Several factors complicate the management of epidemic risk. Diseases can be transmitted rapidly, both within and across countries, which means that timely responses to initial outbreaks are essential. In addition to being exacerbated by globalization, epidemic potential is elevated by the twin phenomena of climate change and urbanization. Climate change is expanding the habitats of various common disease vectors, such as the Aedes aegypti mosquito, which can spread dengue, chikungunya, Zika, and yellow fever. Urbanization means more humans live in close quarters, amplifying the transmissibility of contagious disease. In rapidly urbanizing areas, the growth of slums forces more people to live in conditions with substandard sanitation and poor access to clean water, compounding the problem.

Perhaps the greatest challenge is the formidable array of possible causes of epidemics, including pathogens that are currently unknown. In December 2015 the World Health Organization (WHO) published a list of epidemic-potential disease priorities requiring urgent research and development (R&D) attention. That list has since been updated twice, most recently in February 2018 (see table).

Diseases requiring urgent research and development attention, 2018 DISEASE DESCRIPTION BIOMEDICAL COUNTERMEASURES Crimean-Congo hemorrhagic Hemorrhagic fever caused by virus transmitted through ticks and livestock, with No vaccine available; ribavirin (antiviral) fever (CCHF) case-fatality rate of up to 40%%. Human-to-human transmission is possible. provides some treatment benefit. Ebola virus disease Hemorrhagic fever caused by virus transmitted by wild animals, with case- fatality rate of up to 90%. Human-to-human transmission is possible. Experimental vaccine available Marburg virus disease Hemorrhagic fever caused by virus transmitted by fruit bats, with case-fatality rate of up to 88%%. Human-to-human transmission is possible. No vaccine available Hemorrhagic fever caused by virus transmitted through contact with rodent No vaccine available Lassa fever urine or feces, with case-fatality rate of 15% In severe cases. Human-to-human transmission is possible. Vaccine development funded by CEPI Middle East respiratory syndrome Respiratory disease caused by a coronavirus transmitted by camels and No vaccine available coronavirus (MERS-Cov) humans, with case-fatality rate of 35%. Vaccine development funded by CEPI Severe acute respiratory Respiratory disease caused by a coronavirus transmitted from human to human and from animals (possibly bats), with a case-fatality rate of 109%. No vaccine available syndrome [SARS) Disease caused by a virus transmitted by fruit bats, pigs, and humans; can Nipah and heripaviral diseases manifest as an acute respiratory syndrome or encephalitis. Case-fatality rate Vaccine development funded by CEPI can reach 100%. Disease caused by a virus transmitted by contact with the blood or organs of Rift Valley fever (RVF) Infected animals, or by mosquitos. Up to 50% case-fatality rate in patients with Experimental, unlicensed vaccine hemorrhagic fever. No human-to-human transmission has been reported. available Disease caused by a flavivirus transmitted by mosquitoes. Can result in Tika microcephaly in infants born to infected mothers and in Guillain-Bare No vaccine available syndrome. Human-to-human transmission is possible. CEPI is funding the development of Disease X Institutional and technical platforms (pathogens currently unknown N/A that allow for rapid RAD In response to to cause human disease) outbreaks of pathogens for which no vaccine exists