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

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, spending rises by 1.3 percentage points (relative to the average spending during January 2020) in response to a 1% point increase in initiated vaccination rates. Initial unemployment decreases by 0.09 percentage points of the 2019 labor force. Vaccinations also increase workplace mobility. Urban counties and counties with initially worse socioeconomic conditions and lower education levels exhibit larger effects of vaccinations.