Optimal Vaccine Subsidies for Endemic and Epidemic Diseases

Matthew Goodkin-Gold (), Michael Kremer, Christopher Snyder and Heidi Williams ()
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Matthew Goodkin-Gold: Harvard University - Department of Economics

No 2020-162, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: Vaccines exert a positive externality, reducing spread of disease from the consumer to others, providing a rationale for subsidies. We study how optimal subsidies vary with disease characteristics by integrating a standard epidemiological model into a vaccine market with rational economic agents. In the steady-state equilibrium for an endemic disease, across market structures ranging from competition to monopoly, the marginal externality and optimal subsidy are non-monotonic in disease infectiousness, peaking for diseases that spread quickly but not so quickly as to drive all consumers to become vaccinated. Motivated by the Covid-19 pandemic, we adapt the analysis to study a vaccine campaign introduced at a point in time against an emerging epidemic. While the nonmonotonic pattern of the optimal subsidy persists, new findings emerge. Universal vaccination with a perfectly effective vaccine becomes a viable firm strategy: the marginal consumer is still willing to pay since those infected before vaccine rollout remain a source of transmission. We derive a simple condition under which vaccination exhibits increasing social returns, providing an argument for concentrating a capacity-constrained campaign in few regions. We discuss a variety of extensions and calibrations of the results to vaccines and other mitigation measures targeting existing diseases.

JEL-codes: D4 I18 L11 L65 O31 (search for similar items in EconPapers)
Pages: 90 pages
Date: 2020
New Economics Papers: this item is included in nep-com, nep-dem and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Optimal Vaccine Subsidies for Endemic and Epidemic Diseases (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bfi:wpaper:2020-162

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