The Global Economic Impact of Covid-19 Vaccine

The scenes we witnessed this year could have been straight out of science fiction. Although the vaccine represents a light at the end of the tunnel, the COVID-19 pandemic will continue until the vaccine is accessible worldwide. How well we control the pandemic will depend first on the effective production and distribution of vaccines, then on the effectiveness of our health services and policy making, and finally, the common sense of the public. Global coordination and collaboration are now more important than ever. Both deaths and economic losses will mount unless the production and distribution of vaccines accelerates and includes not just developed countries but the entire world.

COVID-19 pandemic had a devastating effect on both lives and livelihoods in 2020. The arrival of effective vaccines can be a major game changer. However, vaccines are in short supply as of early 2021 and most of them are reserved for the advanced economies. Professor Selva Demiralp and Assistant Professors Cem Çakmaklı, Sevcan Yesiltas and Muhammed Ali Yıldırım of Koç University College of Administrative Sciences and Economics, in collaboration with Şebnem Kalemli Özcan of the University of Maryland, calculated the global economic costs of COVID-19 vaccine in the absence of equitable vaccine distribution.

They show that the global GDP loss of not inoculating all the countries, relative to a counterfactual of global vaccinations, can be higher than the cost of manufacturing and distributing vaccines globally. They use an economic-epidemiological framework that combines a SIR model with international production and trade networks. Based on this framework, they estimate the costs for 65 countries and 35 sectors. Their estimates suggest that up to 49 percent of the global economic costs of the pandemic in 2021 are borne by the advanced economies even if they achieve universal vaccination in their own countries

The findings from the study illustrate that the costs of inequitable vaccine distribution far exceed the costs of manufacturing and distribution of vaccines globally.

The key takeaway from the study is that equitable distribution of vaccines is not only a humanitarian concern but also an economic one. The working paper version of the study is published in the National Bureau of Economic Research (NBER) and Center For Economic Policy Research (CEPR).

More information:
Cem Çakmaklı et al, The Economic Case for Global Vaccinations: An Epidemiological Model with International Production Networks, (2021). DOI: 10.3386/w28395

Provided by Koc University