Impact of Travel Bubbles: Cooperative Travel Arrangements in a Pandemic

39 Pages Posted: 19 Jul 2021

See all articles by Taojun Xie

Taojun Xie

National University of Singapore (NUS) - Asia Competitiveness Institute

Jiao Wang

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Shiqi Liu

National University of Singapore (NUS)

Multiple version iconThere are 2 versions of this paper

Date Written: July 14, 2021

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

JEL Classification: F41, F42, I10

Suggested Citation

Xie, Taojun and Wang, Jiao and Liu, Shiqi, Impact of Travel Bubbles: Cooperative Travel Arrangements in a Pandemic (July 14, 2021). Melbourne Institute Working Paper No. 10/21, Available at SSRN: https://ssrn.com/abstract=3887927 or http://dx.doi.org/10.2139/ssrn.3887927

Taojun Xie

National University of Singapore (NUS) - Asia Competitiveness Institute ( email )

469C Bukit Timah Road
Level 3, Wing A
259772
Singapore

Jiao Wang (Contact Author)

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Shiqi Liu

National University of Singapore (NUS) ( email )

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