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SOS incomes

Working Paper 2020-566

Abstract

Using a static microsimulation model based on a link between survey and administrative data, the article investigates the effects of the pandemic on income distribution in Italy. The analysis focuses both on individuals and on households, by simulating changes in labour incomes and in equivalised incomes, respectively. For both units of observations, changes before and after the emergency income benefits introduced by the Government to deal with the effects of the COVID-19 emergency are compared. The effects of the pandemic are simulated for the whole 2020 under three different scenarios capturing an increasing length of the pandemic. We find that the pandemic has led to a relatively greater drop in labour incomes for those lying in the poorest quantiles, but they were the same having benefited more from the emergency benefits. As a result, compared with the ‘No-COVID scenario’, income poverty and inequality indexes significantly grow in all scenarios when emergency benefits are not considered, whereas the poverty increase greatly narrows and inequality levels slightly decrease once benefits are considered. This evidence signals the crucial role played by cash social transfers to contrast the most serious economic consequences of the pandemic.

Authors: Giovanni Gallo, Michele Raitano.

Keywords: income distribution, inequality, poverty, emergency benefits, microsimulations, Italy, Covid-19
JEL: D31, D63, E27, I32, J31