The purpose of this paper is to provide an assessment of the global economic impacts of severe acute respiratory syndrome (SARS) as well as to provide a more comprehensive approach to estimating the global consequences of major disease outbreaks. Our empirical estimates of the economic effects of the SARS epidemic are based on a global model called the G-Cubed (Asia Pacific) model. Most previous studies on the economic effects of epidemics focus on the disease-associated medical costs or forgone incomes resulting from disease-related morbidity and mortality, but the most significant real costs of SARS have been generated by changes in spending behavior by households and firms in affected countries. This study estimates the cost of the SARS outbreak by focusing on the impacts on consumption and investment behavior through changes in the cost and risk of doing business. Through increased economic interdependence, these changes in behavior have wide-ranging general equilibrium consequences for the world economy that can lead to economic losses well in excess of the traditional estimates of the cost of disease.

This paper is a revised version of a paper that was originally presented to the Asian Economic Panel meeting held in Tokyo, 11–12 May 2003. We have updated that original paper to include the last known case of SARS as of July 2003, and to adjust the scale of some shocks, given new information on the duration of the SARS outbreak. The authors thank Andrew Stoeckel for interesting discussions and many participants at the Asian Economic Panel meeting, particularly Jeffrey Sachs, Yung Chul Park, George von Furstenberg, Wing Thye Woo, and Zhang Wei, for helpful comments. Alison Stegman provided excellent research assistance and Kang Tan provided helpful data. See also the preliminary results and links to the model documentation at The views expressed in the paper are those of the authors and should not be interpreted as reflecting the views of the institutions with which the authors are affiliated, including the trustees, officers, or other staff of the Lowy Institute for International Policy.

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