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Impact of Travel Bubbles: Cooperative Travel Arrangements in a Pandemic

Author

Listed:
  • 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)

  • Shiqi Liu

    (Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore)

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.

Suggested Citation

  • Taojun Xie & Jiao Wang & Shiqi Liu, 2021. "Impact of Travel Bubbles: Cooperative Travel Arrangements in a Pandemic," Melbourne Institute Working Paper Series wp2021n10, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2021n10
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    References listed on IDEAS

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    More about this item

    Keywords

    Travel Bubbles; Optimal Policy; Cooperation; Noncooperation; COVID-19 Pandemic;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • I10 - Health, Education, and Welfare - - Health - - - General

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