Title: Health shock and gender labor market outcome: An estimated DSGE model of the impact of Spanish flu on Swedish economy
Authors: Timo Baas - University of Duisburg-Essen (Germany)
Farzaneh Shamsfakhr - University of Duisburg-Essen (Germany) [presenting]
Abstract: The aim is to develop and estimate a non-linear DSGE model to address the gender labor market properties of business cycle fluctuations succeeding an unexpected health disruption in a household. For this purpose, the impact of 1918 global influenza pandemic known as Spanish Flu is examined using Swedish data during 1915-1956. The novel characteristic of our model is the presence of two kinds of labor, male and female, and the incidence of an epidemic shock affecting both labor supply and the number of households. Our results imply that after a transitory unexpected health shock, an inflow of inactive females to the labor market, in order to substitute the absence or deficiency of infected males in the household and to pay off the subsequent domestic income loss, is expected. Likewise, female labor supply is observed to respond to male labor supply fluctuations over the whole sample period. In the view of that, we see that business cycle is not gender neutral. Furthermore, it is observed that a short-lived epidemic disease can be a potential source of business cycle fluctuations through loss in labor productivity and labor disposal as transmission mechanisms, resulting in a decline in GDP and employment. However, depending on the participation rate of females in the economy, the entry of inactive women into the labor market during the shock wave, can smooth the business cycle fluctuations.