## EPIDEMICS & ECONOMICS

## Source details

**Canonical URL:** [EPIDEMICS & ECONOMICS](https://www.imf.org/-/media/files/publications/fandd/article/2018/june/bloom.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/fandd/article/2018/june/bloom.pdf.md)
- [Structured JSON version](/-/media/files/publications/fandd/article/2018/june/bloom.pdf.json)

---

### Economic impacts of outbreaks and epidemics
- Expected yearly cost of pandemic influenza estimated at roughly $500 billion (0.6 percent of global income), including both lost income and the intrinsic cost of elevated mortality.
- Liberia 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.
- Economic channels of impact:
  - Direct health-system costs (public and private) for medical treatment and outbreak control; sizable outbreaks can overwhelm health systems.
  - Reduced labor supply and productivity as the ill and caregivers miss work or are less effective.
  - Behavior-driven disruptions: social distancing, closed schools, enterprises, commercial establishments, transportation, and public services.
  - Trade and tourism declines (example: 10-year EU ban on British beef after a mad cow disease outbreak).
  - Deterrence of foreign direct investment by long-running epidemics such as HIV and malaria.
- Distributional effects:
  - Some sectors may benefit (pharmaceuticals producing vaccines, antibiotics; providers of outbreak-related products).
  - Health and life insurers likely to bear heavy costs, at least in the short term.
  - Livestock producers heavily affected in zoonotic outbreaks.
  - Vulnerable populations, particularly the poor, suffer disproportionately due to less access to health care and lower savings.

### Drivers and complicating factors increasing epidemic risk
- Rapid transmission within and across countries necessitates timely responses.
- Globalization exacerbates spread.
- Climate change expands habitats of disease vectors (example: Aedes aegypti mosquito transmits dengue, chikungunya, Zika, and yellow fever).
- Urbanization increases human density and amplifies transmissibility; growth of slums leads to substandard sanitation and poor access to clean water.
- A formidable array of causes, including unknown pathogens; WHO published a list of epidemic-potential disease priorities in December 2015, updated most recently in February 2018.
- Antimicrobial resistance:
  - Pathogens resistant to antimicrobials are increasing worldwide; pan-drug-resistant superbugs could pose an additional hazard.

### Surveillance, detection, and preparedness
- Invest in improved sanitation, provisioning of clean water, and better urban infrastructure to reduce human contact with pathogens.
- Strengthen health systems and support proper nutrition to improve baseline health and reduce susceptibility.
- Protect spending on basic systems, services, and infrastructure even when budgets are constrained to safeguard human capital.
- Invest in reliable disease surveillance in human and animal populations.
- Within formal global surveillance systems, consider incentives for reporting suspected outbreaks to mitigate fears about trade and tourism losses (SARS example: earlier reporting by China might have improved containment).
- Value of informal surveillance systems:
  - ProMED and HealthMap aggregate official reports, media reports, online discussions, and eyewitness observations to help responders get ahead of the epidemiological curve.
  - Social media offers opportunities for early detection of incidence shifts.
- National readiness measures:
  - Historical precedent: quarantining ships during plague epidemics to prevent spread to coastal cities.
  - Quarantines may still be necessary for highly virulent, highly transmissible diseases, though they raise human-rights concerns.
  - Predecide rationing priorities for limited biomedical countermeasures (e.g., prioritize first responders and key personnel or favor vulnerable groups such as children and the elderly), recognizing different strategies may suit different diseases.

### Diseases requiring urgent R&D attention (2018) — key entries and countermeasures
- Crimean-Congo hemorrhagic fever (CCHF)
  - Case-fatality rate of up to 40%.
  - No vaccine available; ribavirin (antiviral) provides some treatment benefit.
- Ebola virus disease
  - Case-fatality rate of up to 90%.
  - Experimental vaccine available.
- Marburg virus disease
  - Case-fatality rate of up to 88%.
  - No vaccine available.
- Lassa fever
  - Case-fatality rate of 15% in severe cases.
  - No vaccine available; vaccine development funded by CEPI.
- Middle East respiratory syndrome coronavirus (MERS-CoV)
  - Case-fatality rate of 35%.
  - No vaccine available; vaccine development funded by CEPI.
- Severe acute respiratory syndrome (SARS)
  - Case-fatality rate of 10%.
  - No vaccine available.
- Nipah and henipaviral diseases
  - Case-fatality rate can reach 100%.
  - Vaccine development funded by CEPI.
- Rift Valley fever (RVF)
  - Up to 50% case-fatality rate in patients with hemorrhagic fever.
  - Experimental, unlicensed vaccine available.
- Zika
  - Associated with microcephaly in infants and Guillain-Barré syndrome; human-to-human transmission is possible.
  - No vaccine available.
- Disease X (pathogens currently unknown to cause human disease)
  - CEPI is funding development of institutional and technical platforms for rapid R&D in response to pathogens for which no vaccine exists.

### R&D, market failures, and technological responses
- Market failure in vaccine development for individual low-probability, high-severity pathogens:
  - Low probability each vaccine will be needed, high R&D costs, and delayed returns deter private pharmaceutical investment.
  - Profit-seeking incentives do not align with the social interest of minimizing aggregate epidemic risk.
- Role of farsighted international collaboration to overcome market failure:
  - Coalition for Epidemic Preparedness Innovations (CEPI) supports advancing candidate vaccines through proof of concept and enabling rapid clinical testing and scale-up.
  - CEPI also funds development of institutional and technical platforms to speed R&D for pathogens lacking vaccines; similar models could support a universal influenza vaccine.
  - CEPI is supported by the governments of Australia, Belgium, Canada, Ethiopia, India, Japan, Germany, and Norway, as well as the European Commission and various nongovernmental funders.
- Ensuring access:
  - New vaccines are less useful without assurance that at-risk populations have access.
  - Assured access could motivate developing economies to participate in R&D.
  - Example: In 2007 Indonesia withheld H5N1 virus samples from WHO to protest that companies in wealthy countries used samples from developing economies without returning profit or special benefits to donors.
- Centralized stockpiling:
  - International collaboration could support centralized stockpiling of vaccines and drugs deployable where most needed, with cooperation and cost sharing justified by the global public good of pandemic avoidance.
  - Wealthy countries at relatively low health risk could still suffer disproportionately large economic losses from faraway epidemics due to the size of their economies and reliance on foreign trade.

### Economic mitigation tools and policy recommendations
- Insurance as a mechanism to distribute economic burden across sectors and regions, analogous to natural-disaster risk management.
- Prioritize key personnel (health care workers, military, public safety employees) for biomedical countermeasures during outbreaks to protect critical economic resources.
- Invest in:
  - Sanitation, clean water, and urban infrastructure.
  - Strong health systems and nutrition.
  - Reliable human and animal disease surveillance (formal and informal).
  - Early-detection technologies, including leveraging social media and aggregated reporting systems.
  - R&D for vaccines, novel antibiotics, and antivirals, and development of rapid-response R&D platforms.
- Encourage international cooperation for:
  - Funding vaccine R&D (addressing market failure).
  - Assured access mechanisms for developing economies.
  - Centralized stockpiles and cost-sharing arrangements.
  - Incentives to report suspected outbreaks to formal global surveillance systems.

*David E. Bloom, Daniel Cadarette, and JP Sevilla, Finance & Development, June 2018.*

---


_Source: https://www.imf.org/-/media/files/publications/fandd/article/2018/june/bloom.pdf_