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COVID-19 Vaccines: A Shot in Arm for the Economy

Author

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  • Mr. Niels-Jakob H Hansen
  • Rui Mano
Abstract
We quantify the effect of vaccinations on economic activity in the United States using weekly county level data covering the period end-2020 to mid-2021. Causal effects are identified through instrumenting vaccination rates with county-level pharmacy density interacted with state-level vaccine allocations, and by including county and state-time fixed effects to control for unobserved factors. We find that vaccinations are a significant and substantial shot in the arm of the economy. Specifically, an increase of initiated vaccination rates of 1 percentage point increases weekly consumer spending by 0.6 percent and reduces weekly initial unemployment claims by 0.004 percentage points of the 2019 labor force. Vaccinations also increase workrelated mobility. Importantly, we find that the effects vary with county characteristics. Specifically, urban counties and counties with initially worse socioeconomic conditions and lower education levels exhibit larger effects of vaccinations. This way, vaccinations are also a fair shot in the arm for the economy, which highlights that equitable distribution of vaccines is important to reduce inequality. Our results are specific to the United States, but hold important lessons for the expected economic impact of vaccinations in other countries.

Suggested Citation

  • Mr. Niels-Jakob H Hansen & Rui Mano, 2021. "COVID-19 Vaccines: A Shot in Arm for the Economy," IMF Working Papers 2021/281, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2021/281
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    References listed on IDEAS

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    Cited by:

    1. Zheng, Yi & Ren, He, 2024. "COVID-19 vaccination and housing payments," Journal of Housing Economics, Elsevier, vol. 64(C).
    2. Barro, Robert J., 2022. "Vaccination rates and COVID outcomes across U.S. states," Economics & Human Biology, Elsevier, vol. 47(C).
    3. Selien De Schryder & Nikolaos Koutounidis & Koen Schoors & Johannes Weytjens, 2024. "Assessing the Heterogeneous Impact of COVID-19 on Consumption Using Bank Transactions," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 24/1090, Ghent University, Faculty of Economics and Business Administration.

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    More about this item

    Keywords

    COVID-19; pandemics; vaccinations.; initiated vaccination rate; IMF working papers; vaccine allocation; effect of vaccination; vaccination rate; Unemployment; Labor force; Unemployment benefits;
    All these keywords.

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