The Effect of the 1918 Influenza Pandemic on Income Inequality: Evidence from Italy

In this paper, we estimate the effect of the 1918 Influenza pandemic on income inequality in Italian municipalities. Our identification strategy exploits the exogenous diffusion of influenza across municipalities due to the presence of infected soldiers on leave from World War I operations at the peak of the pandemic. Our measures of income inequality come from newly digitized historical administrative records on Italian taxpayer incomes. We show that in the short-/medium-run (i.e., after five years), income inequality is higher in Italian municipalities more afflicted by the pandemic. The effect is mostly explained by a reduction in the share of income held by poorer people. Finally, we provide initial evidence that these differences in income inequality persist even after a century.