Fence off Black Swans: The Economics of Insurance for Vaccine Injury*

Abstract

AbstractBeing injured during vaccination, although infrequent, can occur, and this necessitates understanding the consequences of vaccine injuries. In this study, we analyse the impact of the risk of vaccine injuries, particularly the economic importance of vaccine injury compensation insurance (VICI) programmes for the injured, which few studies have investigated. Specifically, we examine the role of VICI on individuals' vaccination decisions by integrating an imperfect vaccine into an epidemiological‐economic model in the presence and absence of such an insurance mechanism. Our findings show that the risk of being injured is a non‐negligible risk that lowers individuals' incentives to be vaccinated. The introduction of VICI largely alleviates decision‐makers' concern about vaccine injury. Furthermore, our extended discussion shows the effect of insurance in encouraging vaccination persists under some more sophisticated scenarios.