Why High-Income Economies Need to Fight COVID Everywhere

Why High-Income Economies Need to Fight COVID Everywhere

Timothy Taylor 04/02/2021 4
Why High-Income Economies Need to Fight COVID Everywhere

High-income countries are pushing and squabbling as they seek to vaccinate their own populations from COVID-19, while many lower-income countries have been pushed to the sidelines and forced to watch.

But it's not clear yet clear (because not enough time has passed) to know for how long the vaccine provides protection, or for that matter, how long having had COVID provides protection against getting it again. Moreover, there is clearly some danger that at least some of the new strains of COVID emerging around the world might need different vaccines. 

In short, vaccinating the populations of high-income countries is a useful step. But if COVID remains prevalent and mutating into new strains in the rest of the world, we may be running on a treadmill from a public health point of view. Moreover, because of the interconnectedness of the world economy, there is a basic cost-benefit argument the high-income countries of the world to work together in a way that can make COVID vaccination widespread around the world. 

Cem Çakmaklı, Selva Demiralp, Ṣebnem Kalemli-Özcan, Sevcan Yeşiltaş and Muhammed A. Yıldırım make this case in "The Economic Case for Global Vaccinations: An Epidemiological Model With International Production Networks" (January 2021, available with free registration from the International Chamber of Commerce, and also available as NBER Working Paper #28395). 

The authors offer a useful reminder of interconnections in the world economy. Exports of goods and services are about 30% of world GDP.  Of that trade, about 60% is "intermediate products," meaning products that are part of the production process for final goods, rather than being final goods themselves. The pandemic recession makes it harder for low- and middle-income countries either to purchase exports from  high-income countries or to produce intermediate products used by producers in high-income countries. To illustrate the issues here, consider two figures the authors produce to illustrate the interconnectedness of the global economy. 

This figure includes 65 countries, and then a ROW or "rest of the world" box to combine the others. The sizes of the boxes are relative to the size of the GDP of each area. The darker the shade of blue, the higher the ratio of export and imports to GDP. The thickness of the lines shows the importance of trade relative to the GDP for the two countries. Small connections between countries are not shown at all. Countries with a black line around their names have access to vaccines right now: of the 65 countries, 41 have access.

  International Trade  

One can also look at the interconnectedness of global world production by industry. Here, the size of each node shows the size of the industry. The arrows show flows of goods from one industry to another. The darker the color, the more heavily that node depends on imports from other countries. 

International Trade 2

The authors write: "We show that even if AEs [advanced economies] eliminate the domestic costs of the pandemic thanks to the vaccines, the costs they bear due to their international linkages would be in the range of 0.2 trillion USD and 2.6 trillion USD, depending on the strength of trade and production linkages. Overall, AEs can bear up to 49 percent of the global costs in 2021. These numbers are far larger than the 27.2 billion USD cost of manufacturing and distributing vaccines globally."

The exact numbers from this study are of course imprecise, representing a range of different assumptions. But the basic lesson, which has applied at many points in the pandemic experience, is clear enough: what might seem like fairly large up-front costs actually are a pretty cheap price to pay for the benefits. It's not really a surprise that high-income countries would put a  higher priority on on vaccine supplies for their own citizens first. But if the high-income countries think that protecting their own citizens will insulate them from economic costs, or from future public health risks, they are missing some basic insight about what it means to live in a world where goods and people cross national boundaries all the time. 

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  • Paul Jeffels

    High income countries won''t defeat covid if they don't help other countries in need of a vaccine.

  • Jon Perkins

    Vaccine inequality isn't covered enough enough by the media

  • Ian Bergman

    We live in an open world, vaccinate everyone !!!

  • Patrick Reed

    Some high income countries are making questionable decisions related to covid vaccine.

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Timothy Taylor

Global Economy Expert

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.

   

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