When Inequality is High, Pandemics Can Fuel Social Unrest

IMF Blog, December 11, 2020

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Analysis covers past major pandemics in 133 countries over 2001–18: SARS in 2003, H1N1 in 2009, MERS in 2012, Ebola in 2014, and Zika in 2016.
Social unrest measured using the International Country Risk Guide’s civil disorder score (a high frequency and cross-country measure).
Research presented in an IMF staff working paper and summarized in the IMF blog Chart of the Week (December 11, 2020).

Two complementary econometric approaches:
- Monthly-frequency analysis: uses monthly social unrest and pandemic data to estimate how the level of social unrest responds to exogenous pandemic events; establishes a direct link between exogenous pandemic events and civil disorder (expressed as a score).
- Annual-frequency analysis: explores channels through which past major pandemics lead to social unrest in the medium term, focusing particularly on inequality and economic growth.

Social unrest increased consistently following each of the listed outbreaks.
The International Country Risk Guide’s civil disorder score increased significantly, on average, one year after the pandemic.
Past major pandemics led to a significant increase in social unrest in the medium term by:
- Reducing growth, and
- Increasing inequality.
The interaction between these effects forms a vicious cycle:
- Higher social unrest is associated with lower growth, which worsens inequality, reinforcing further social unrest.

The effect of pandemics on social unrest is stronger when pre-existing income inequality is high.
An increase in the net (post-tax and transfer) Gini coefficient is associated with more social unrest when the initial level of the net Gini is above 0.4.
More than 45 percent of countries in the world have a net Gini coefficient higher than 0.4.
About one-third of Asian economies have a net Gini coefficient higher than 0.4.

The impact of inequality on social unrest depends on the extent of redistributive transfers.
An increase in inequality is associated with more unrest when redistributive transfers are low.
This suggests that social safety measures and redistributive transfers help reduce social tensions.

Policymakers need to pay special attention to preventing scarring effects on the livelihoods of the most vulnerable in their societies.
Targeted social safety measures and redistributive transfers can mitigate the link between rising inequality and social unrest after pandemics.
Historical trends do not pre-determine outcomes; appropriate policy action can change trajectories.

Source: IMF Blog — “When Inequality is High, Pandemics Can Fuel Social Unrest” (December 11, 2020).