Impact of Travel Bubbles: Cooperative Travel Arrangements in a Pandemic

Taojun Xie, Jiao Wang () and Shiqi Liu
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Taojun Xie: Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore
Jiao Wang: Melbourne Institute: Applied Economic & Social Research, The University of Melbourne, https://findanexpert.unimelb.edu.au/profile/778050-jiao-wang
Shiqi Liu: Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: We develop a two-region Susceptible-Infected-Recovered-Macroeconomic model to evaluate the cooperative and non-cooperative cross-border travel arrangements during a pandemic. In a symmetric setting, the Pareto optimal is a cooperative travel arrangement that emphasizes exclusively on domestic containment. A non-cooperative game between social planners results in high travel restrictions with little benefit in economics or health. With asymmetric pandemic dynamics, a border closure on average results in less welfare loss than a noncooperative game, compared to cooperation. A border control allowing minimal essential travel only delays the outbreak in a region initially not infected. This can however be remedied by a timely vaccination plan. Under cooperation, pre-departure tests further enhance the welfare. Applying our model, we estimate that the Singapore { Hong Kong travel bubble is valued at US$635.1 per capita, and the Australia { New Zealand travel bubble is valued at US$307.8 per capita.

Keywords: Travel Bubbles; Optimal Policy; Cooperation; Noncooperation; COVID-19 Pandemic (search for similar items in EconPapers)
JEL-codes: F41 F42 I10 (search for similar items in EconPapers)
Pages: 39pp
Date: 2021-07
New Economics Papers: this item is included in nep-gth and nep-sea
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