Why was the Singapore – Hong Kong travel bubble deferred twice? Will a high vaccination rate give policy makers the necessary confidence to proceed with it again? Our latest research explores the decision-making process among global leaders as they work towards cooperative travel arrangements in a pandemic.
Reopening international travel is one of the most pressing issues facing the world as it emerges from the COVID-19 pandemic. Yet, some global leaders still hesitate. The urgent need for border closures to curb the spread of COVID-19 throughout 2020 almost brought the global travel industry to a halt. Several different policy methods to reopen economies and restart travel were discussed and implemented, all dependent on unique circumstances. The most persistent questions that arose are how this process can be carried out most effectively? How should policy makers weigh up the health-economic costs? Are cooperative or independent approaches the most suitable way forward? The research by ACI assesses these questions, focusing on regional cooperation methods and the potential externalities when one region holds back.
The research paper titled ‘Impact of Travel bubbles: Cooperative Travel Arrangements in a Pandemic’ provides an analytical framework to formally assess the implications of several cross-border travel arrangements for economics, health, and societal welfare. The authors construct a two-region Susceptible-Infected-Recovered-Macroeconomic (SIR-Macro) model and evaluate the solutions to reopening the borders.
Some policy makers opt for cooperative approaches while others choose not to cooperate. Cooperative methods include two or more regions allowing travel between the regions in a free, or less restrictive manner. Some examples include green lanes for business travel and travel bubbles. However, some regions opt for non-cooperative approaches instead. One side of the extreme is a lazzie-faire approach with no restrictions imposed, with the other end being a complete border shutdown. Other policies include limited air tickets, long quarantine periods, and mandatory medical testing, all with the purpose of deterring potential travellers. The heterogeneous approaches to resuming cross-border travel are results of the difficulty in evaluating the health-economics trade-off.
The analytical framework provided in the paper aims to identify optimal policy action and addresses potential challenges in evaluating such travel arrangements. The framework is the first of its kind upon publication, that derives optimal travel-related policies in both cooperative and non-cooperative settings. The paper further delves into an assessment of the values of existing and upcoming travel arrangements between Singapore and Hong Kong, and between Australia and New Zealand. The results of these assessments provide useful bases in inter-region discussions pertaining to reopening borders.
The research offers several key findings, stating that (1) optimal cooperative policy is the best policy response, (2) border control induces much higher costs than border closures do in regions that are not initially infected, but these costs can be mitigated with timely vaccination, and (3) pre-departure testing is welfare improving only when regions do cooperate.
Researchers: Taojun XIE, Jiao WANG, Shiqi LIU