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The impact of COVID-19 on households´ income in the EU

Author

Listed:
  • Vanda Almeida

    (European Commission, Joint Research Centre (JRC-Seville))

  • Salvador Barrios

    (European Commission, Joint Research Centre (JRC-Seville))

  • Michael Christl

    (European Commission, Joint Research Centre (JRC-Seville))

  • Silvia Poli

    (European Commission, Joint Research Centre (JRC-Seville))

  • Alberto Tumino

    (European Commission, Joint Research Centre (JRC-Seville)
    University of Essex)

  • Wouter Wielen

    (European Commission, Joint Research Centre (JRC-Seville))

Abstract

This analysis makes use of economic forecasts for 2020 issued by the European Commission in Autumn 2019 and Spring 2020, and of a counterfactual under a no-policy change assumption, to analyse the impact of the COVID-19 crisis on EU households´ income. Additionally, our analysis assesses the cushioning effect of discretionary fiscal policy measures taken by the EU Member States. We find that the COVID-19 pandemic is likely to affect significantly households’ disposable income in the EU, with lower income households being more severely hit. However, our results show that due to policy intervention, the impact of the crisis is expected to be similar to the one experienced during the 2008–2009 financial crisis. In detail, our results indicate that discretionary fiscal policy measures will play a significant cushioning role, reducing the size of the income loss (from −9.3% to −4.3% for the average equivalised disposable income), its regressivity and mitigating the poverty impact of the pandemic. We conclude that policy interventions are therefore instrumental in cushioning against the impact of the crisis on inequality and poverty.

Suggested Citation

  • Vanda Almeida & Salvador Barrios & Michael Christl & Silvia Poli & Alberto Tumino & Wouter Wielen, 2021. "The impact of COVID-19 on households´ income in the EU," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 19(3), pages 413-431, September.
    • Handle: RePEc:spr:joecin:v:19:y:2021:i:3:d:10.1007_s10888-021-09485-8
    DOI: 10.1007/s10888-021-09485-8
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    More about this item

    Keywords

    COVID-19; Fiscal policy; Earnings subsidies; Income distribution; Unemployment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid

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