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  5. COVID-19: Impacts on Household Economics, Inequality and Poverty
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COVID-19: Impacts on Household Economics, Inequality and Poverty

Paper Session

Tuesday, Jan. 5, 2021 10:00 AM - 12:00 PM (EST)

Hosted By: International Health Economics Association
  • Chair: Winnie Yip, Harvard University

Epidemics and Income Inequality, 2000–2019

Chrys Esseau-Thomas
,
International Monetary Fund
Omar Galárraga
,
Brown University
Sherif Khalifa
,
California State University

Abstract

The 2019 novel coronavirus (2019-nCoV) is part of a series of recent infectious disease outbreaks that include: Ebola, Avian influenza, Middle East respiratory syndrome coronavirus (MERS-CoV), Influenza A (H1N1), etc. How do these epidemics and pandemics affect income inequality in countries around the world during the first two decades of the 21st century, and what role do political leaning, corruption, and democratic institutions play in alleviating or exacerbating the potential effects? Collating comprehensive panel data from 191 countries, we use the Gini coefficient as an indicator of income inequality. Using country- and year-fixed effects regression models, we find that an epidemic/pandemic shock increased income inequality by 4.6 points. In most countries examined, Gini coefficients were stable or slightly decreasing since 2000. Using a rich set of time-varying control variables, we find that the epidemic/pandemic positive correlation with income inequality is attenuated in the contemporaneous time period, and that the effect had an average duration of 2-3 years, particularly for countries with (1) more corruption and (2) less democratic institutions. We conclude that the epidemics and pandemics of the early 21st century contributed to the stagnation, and even worsening, of the otherwise slightly decreasing trends in global income inequality.

Wage Inequality and Poverty Effects of Lockdown and Social Distancing in Europe

Juan C. Palomino
,
University of Oxford
Juan G. Rodríguez
,
Complutense University of Madrid
Raquel Sebastian
,
Complutense University of Madrid

Abstract

Enforced social distancing and lockdown measures taken to contain the spread of COVID-19 will have economic costs beyond the contraction of GDP. In this paper we analyse the capacity of individuals to work under a lockdown based on their teleworking capacity and whether their occupation is considered essential or closed, finding substantial and uneven potential wage losses across the distribution. Assuming a 2 months’ lockdown scenario, we estimate for 29 European countries an average increase in the headcount poverty index of 4.9 percentage points, while the Gini coefficient rises by 3.5%. These estimates increase under longer lockdown scenarios or if we assume an additional de-escalation period with partial functioning of some activities. When we decompose overall inequality in Europe, both between-countries and within-countries components significantly increase, with the change of the latter being more important.

The Impact of COVID-19 on Household Economic Dynamics in Kenya, Burkina Faso, DRC, and Nigeria

Carolina Cardona
,
Johns Hopkins University
Elizabeth Gummerson
,
Johns Hopkins University
Philip Anglewicz
,
Johns Hopkins University
Scott Radloff
,
Johns Hopkins University

Abstract

The socioeconomic impact of the COVID-19 pandemic will be different for developing countries than for developed nations. Non-pharmaceutical interventions are hard to implement when a population has no social safety net, and the most vulnerable cannot even afford clean water and soap. In this research, we use representative longitudinal panel data from the Performance Monitoring for Action (PMA) Project, which includes measures for the same individuals shortly before and during the COVID-19 pandemic. PMA collected baseline data from 14,486 women of reproductive age in Kenya, Burkina Faso, Democratic Republic of Congo, and Nigeria in the fall/winter of 2019, and then followed up with participating individuals with a phone interview on COVID-19. To assess the effect of COVID-19 on household socioeconomic status, we construct a quantile regression model using these longitudinal panel data. A quantile regression accounts for heterogeneity across the wealth distribution. Our outcomes of interest are food security and household purchases. We also examine whether the economic impact of COVID-19 differed by socioeconomic characteristics that were measured at baseline, such as wealth, age, level of education, and parity. Understanding the magnitude of the socioeconomic effects will allow the design of better policies for the post-COVID era.

How Should Policy Responses to the COVID-19 Pandemic Differ in the Developing World?

Titan Alon
,
University of California-San Diego
Minki Kim
,
University of California-San Diego
David Lagakos
,
Boston University
Mitchell VanVuren
,
University of California-San Diego

Abstract

The COVID-19 pandemic has already led to dramatic policy responses in most advanced economies, and in particular sustained lockdowns matched with sizable transfers to much of the workforce. This paper provides a preliminary quantitative analysis of how aggregate policy responses should differ in developing countries. To do so we build an incomplete-markets macroeconomic model with epidemiological dynamics that features several of the main economic and demographic distinctions between advanced and developing economies relevant for the pandemic. We focus in particular on differences in population structure, fiscal capacity, healthcare capacity, the prevalence of "hand-to-mouth'' households, and the size of the informal sector. The model predicts that blanket lockdowns are generally less effective in developing countries at reducing the welfare costs of the pandemic, saving fewer lives per unit of lost GDP. Age-specific lockdown policies, on the other hand, may be even more potent in developing countries, saving more lives per unit of lost output than in advanced economies.
Discussant(s)
Arnab Mukherji
,
Indian Institute of Management Bangalore
Sang Yoon (Tim) Lee
,
Queen Mary University of London
Enrica Croda
,
Ca' Foscari University of Venice
Edwine Barasa
,
Kenya Medical Research Institute (KEMRI)
JEL Classifications
  • I3 - Welfare, Well-Being, and Poverty
  • G5 - Household Finance