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COVID-19 Pandemic and economic stimulus policy inequality

Working Paper 2021-585

Abstract

This paper investigates the impact of the COVID-19 pandemic on economic stimulus policy inequality. Using the standard DID and continuous variable DID methods with data from 156 economies, empirical results show that, deaths tolls have a greater impact on economic stimulus policies than cases; the cumulative effect is more influential to economic stimulus than the short-term effect. Among other additional socio-economic determinants, economic development level is robustly positively correlated with the economic stimulus intensity, while the medical condition is negatively correlated. Population density and proportion of aging population are positively correlated with the intensity of fiscal policies. Heterogeneity tests show that while economic policies are used in developed economies more often, restrictive measures in developing countries may be used as a substitute for economic stimulus. Our results show that the impact of the epidemic may have increased economic inequality to some extent due to the impact of policy capabilities, requiring international coordination and assistance to low – and middle-income countries.

Authors: Xingyuan Yao.

Keywords: COVID-19 Pandemic, Economic stimulus policy, Economic inequality, Quasi-natural experiment
JEL: O23, E50, E62