Premiums for vaccine doses

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The EU should pay tardy suppliers of Covid vaccines an additional premium for each extra dose delivered earlier. They would still be much cheaper than a prolonged lockdown.

02/01/2021 · Wirtschafts- und Sozialwissenschaften, Raumwissenschaften · ifo Institut Leibniz-Institut für Wirtschaftsforschung an der Universität München e. V. · News · Forschungsergebnis

The EU should pay tardy suppliers of Covid vaccines an additional premium for each extra dose delivered earlier. This is what economists Clemens Fuest (ifo Institute) and Daniel Gros (CEPS) call for in a recent paper. The statement is a reaction to the less than binding conditions in the contracts with pharmaceutical manufacturers, which are now leading to a slow progress of the vaccination measures.

The additional cost of ramping up vaccine supplies for Europe could amount to several billion euros, the authors write. "The premiums are nevertheless worthwhile, because they would still be much cheaper than a prolonged lockdown of important parts of the EU, with its annual economic output of 14 trillion euros" explains Fuest. " In addition, there are the long-term costs of closing schools and - last but not least - the loss of human life." Each extra dose of vaccine delivered in 2021 is estimated  to be worth about 1,500 euros to society, the authors elaborate, a multiple of the price, which is currently no more than 15 euros. The premium should be a multiple of the price agreed to date at the beginning and decrease over time. In this way, companies would have a strong incentive to ramp up production.

Original publication

Clemens Fuest and Daniel Gros: "Vaccines: How to Use Market-Based Incentives to Ramp Up Production", EconPol Opinion 44, February 2021

Further information and contact

www.ifo.de/en