Working Paper: CEPR ID: DP15710
Authors: Cem Akmakl; Selva Demiralp; Sebnem Kalemli-Ozcan; Sevcan Yesiltas; Muhammed A. Yıldırım
Abstract: We present a global general equilibrium model that incorporates input-output linkages across multiple sectors and countries to analyze the impact of pandemic-related labor supply shocks. These shocks vary across industries due to differences in how occupations are affected by the disease, influenced by factors such as contact intensity and the feasibility of remote work. Using the model, we quantify the economic rationale for global vaccinations. Given empirically relevant trade and production elasticities, where labor and imported intermediate inputs complement each other, we examine several scenarios. If wealthy countries vaccinate only their own populations, global output could decline by nearly 1% compared to pre-pandemic levels. In contrast, investing in global vaccinations could yield a 178% return on investment for wealthy nations and potentially halve the global output decline. Vaccinating low-income countries could mitigate economic impacts on wealthy nations through sectoral trade and production linkages, significantly reducing losses by 70% without compromising rich countries own vaccination efforts.
Keywords: COVID-19; Vaccination; Policy Coordination; Sectoral Shocks; Production Networks
JEL Codes: C67; D57; F00; F16; F17; I18; P45
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lack of vaccinations in EMDEs (I15) | significant output losses in AEs (E23) |
| significant output losses in AEs (E23) | shortage of intermediate inputs (D24) |
| significant output losses in AEs (E23) | higher import prices (F14) |
| significant output losses in AEs (E23) | weak demand for exports (F14) |
| vaccination rates in EMDEs (O15) | real GDP losses for vaccinated AEs (F69) |
| real GDP losses for vaccinated AEs (F69) | GDP loss for AEs investing in global vaccination initiatives (F69) |