Abstract

Vaccination provides indirect benefits to the unvaccinated. Despite its important policy implications, there is little analytical or empirical work to quantify this externality, nor is it incorporated in a number of cost-benefit studies of vaccine programs. We use a standard epidemiological model to analyze how the magnitude of this externality varies with the number of vaccinations, vaccine efficacy, and disease infectiousness. We also provide empirical estimates using parameters for influenza and mumps epidemics. The pattern of the externality is complex and striking, unlike that suggested in standard treatments. The size of the externality is not necessarily monotonic in the number vaccinated, vaccine efficacy, nor disease infectiousness. Moreover, its magnitude can be remarkably large. In particular, the marginal externality of a vaccination can be greater than one case of illness prevented among the nonvaccinated, so its omission from policy analyses implies serious biases.