COVID-19 and Inequality in Asia: Breaking the Vicious Cycle

IMF Working Papers, October 16, 2020

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Authors: Emilia M Jurzyk, Medha Madhu Nair, Nathalie Pouokam, Tahsin Saadi Sedik, Irina Yakadina
Published: October 16, 2020
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9781513559179.001

Authors: Emilia M Jurzyk, Medha Madhu Nair, Nathalie Pouokam, Tahsin Saadi Sedik, Irina Yakadina
Publication date: October 16, 2020
Type: IMF Working Paper (Working Paper No. 2020/217)
Core message: The COVID-19 pandemic risks exacerbating inequality in Asia; without policies that break historical patterns, income inequality—already high and rising—is likely to rise further over the medium term.

The pandemic is having particularly adverse effects on:
- younger workers
- women
- people that are more vulnerable
Empirical and historical evidence: Pandemics have been shown to increase inequalities.
Pre-pandemic context: Income inequality in Asia was already high and rising before the pandemic.
Fiscal responses: Many Asian governments have implemented significant fiscal policy measures to mitigate the pandemic’s effect on the most vulnerable.
Effectiveness of fiscal measures depends on:
- initial coverage of safety nets
- fiscal space
- degree of informality
- degree of digitalization

The paper includes model-based analysis (Susceptible-Infected-Recovered Macro Model referenced in keywords).
Key model conclusion:
- Policies targeted to where needs are greatest are effective in mitigating adverse distributional consequences and in underpinning overall economic activity and virus containment.

Target fiscal policies to populations and sectors with the greatest need to:
- mitigate adverse distributional consequences
- support overall economic activity
- assist virus containment efforts
Design of policy responses should account for:
- existing safety net coverage
- available fiscal space
- informality in labor markets
- level of digitalization for delivery and targeting

Subject: Consumption, COVID-19, Education, Health, Income, Income inequality, Labor, National accounts
Keywords: Asia and Pacific, Consumption, coronavirus disease pandemic, COVID-19, Fiscal Policy, Fiscal Policy., Global, government-imposed lockdown, IMF staff calculation, Income inequality, Inequality, pandemic course, pandemic recession, Susceptible-Infected-Recovered Macro Model, WP