{ "title": "How COVID-19 Will Increase Inequality in Emerging Markets and Developing Economies", "publication": "IMF Blog, October 29, 2020", "sourceUrl": "https://www.imf.org/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies", "canonical": "https://www.imf.org/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies", "overlayPath": "/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies/index.md", "summary": "Authors: Gabriela Cugat, Futoshi Narita", "sections": [ { "heading": "Overview", "content": "- Authors: Gabriela Cugat, Futoshi Narita\n- Date: October 29, 2020\n- Summary: Emerging markets and developing economies made sustained gains in poverty reduction and life expectancy in the two decades before COVID-19, but many struggled to reduce income inequality, faced high shares of inactive youth, wide inequality in education, and large gender gaps in economic opportunities. The COVID-19 crisis risks reversing much of the progress and widening the gap between rich and poor." }, { "heading": "Impact of where you work", "content": "- Key facts used to estimate effect on inequality:\n - Ability to work from home is lower among low-income workers than for high-income earners.\n - Sectors with activities more likely to be performed from home experienced smaller employment reductions (evidence from the United States).\n- Implication:\n - Lower-income workers were less likely to be able to work from home and more likely to lose their jobs, worsening the income distribution." }, { "heading": "Methodology and distributional effect", "content": "- Approach:\n - Use the IMF’s GDP growth projections for 2020 as a proxy for aggregate decrease in income.\n - Distribute this loss across income brackets in proportion to their ability to work from home.\n - Compute a post-COVID summary measure of income distribution (Gini coefficient) for 2020 for 106 countries and compute the percent change.\n- Interpretation of Gini:\n - The higher the Gini coefficient, the greater the inequality, with high-income individuals receiving much larger percentages of total income.\n- Findings:\n - The estimated effect from COVID-19 on the income distribution is much larger than that of past pandemics.\n - The analysis shows that the average Gini coefficient for emerging market and developing economies will rise to 42.7, which is comparable to the level in 2008.\n - The impact would be larger for low-income developing countries despite slower progress since 2008." }, { "heading": "Welfare implications", "content": "- Welfare measure:\n - Combines information on consumption growth, life expectancy, leisure time, and consumption inequality (goes beyond GDP).\n- Historical change:\n - From 2002 to 2019, emerging markets and developing economies enjoyed welfare growth of almost 6 percent, which is 1.3 percentage points higher than per capita real GDP growth.\n - The increase was mostly due to improvements in life expectancy.\n- Pandemic effect:\n - The pandemic could reduce welfare by 8 percent in emerging markets and developing countries.\n - More than half of this reduction stems from the excess change in inequality as a result of a person’s ability to work from home.\n - These estimates do not reflect any income redistribution measures after the pandemic, meaning policy actions can dampen the effect on inequality and welfare." }, { "heading": "Policy recommendations", "content": "- Support labor market transitions:\n - Invest in retraining and reskilling programs to boost reemployment prospects for adaptable workers whose job duties may see long-term changes.\n- Expand digital and financial inclusion:\n - Expand access to the internet and promote financial inclusion for an increasingly digital world of work.\n- Strengthen social insurance and leave policies:\n - Relax eligibility criteria for unemployment insurance and extend paid family and sick leave to cushion job impacts.\n- Protect social assistance:\n - Maintain social assistance in the form of conditional cash transfers, food stamps, and nutrition and medical benefits for low-income households; avoid premature withdrawal.\n- Rationale:\n - These measures are essential for keeping the inequality gap from widening further and for preventing decades of hard-won gains from being lost." }, { "heading": "Collaboration note", "content": "- The blog draws on research conducted under a research collaboration on macroeconomic policy in low-income countries supported by the United Kingdom’s Foreign, Commonwealth and Development Office (FCDO).\n- The views expressed do not necessarily represent the views of the FCDO.\n\nSource: IMF blog post “How COVID-19 Will Increase Inequality in Emerging Markets and Developing Economies,” October 29, 2020.\n\n---\n\n\n References\n\n- عربي\n- 日本語,\n- Português\n- World Economic Outlook\n- study\n\nSource: https://www.imf.org/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies/index.md)", "[Structured JSON version](/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies/index.json)", "[Bundle manifest](/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies/bundle-manifest.json)", "Authors: Gabriela Cugat, Futoshi Narita", "Published: October 29, 2020", "Authors: Gabriela Cugat, Futoshi Narita", "Date: October 29, 2020", "Summary: Emerging markets and developing economies made sustained gains in poverty reduction and life expectancy in the two decades before COVID-19, but many struggled to reduce income inequality, faced high shares of inactive youth, wide inequality in education, and large gender gaps in economic opportunities. The COVID-19 crisis risks reversing much of the progress and widening the gap between rich and poor.", "Key facts used to estimate effect on inequality:", "Implication:", "Approach:", "Interpretation of Gini:", "Findings:", "Welfare measure:", "Historical change:", "Pandemic effect:", "Support labor market transitions:", "Expand digital and financial inclusion:", "Strengthen social insurance and leave policies:", "Protect social assistance:", "Rationale:", "The blog draws on research conducted under a research collaboration on macroeconomic policy in low-income countries supported by the United Kingdom’s Foreign, Commonwealth and Development Office (FCDO).", "The views expressed do not necessarily represent the views of the FCDO.", "[عربي](https://www.imf.org/ar/News/Articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies)", "[日本語,](https://www.imf.org/ja/News/Articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies)", "[Português](https://www.imf.org/pt/News/Articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies)", "[World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020)", "[study](https://www.imf.org/en/Publications/WP/Issues/2020/06/12/Who-will-Bear-the-Brunt-of-Lockdown-Policies-Evidence-from-Tele-workability-Measures-Across-49479)" ], "alternates": { "markdown": "/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies/index.md", "json": "/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies/index.json", "bundleManifest": "/en/blogs/articles/2020/10/29/blog-how-covid-19-will-increase-inequality-in-emerging-markets-and-developing-economies/bundle-manifest.json" }, "generatedAtUtc": "2026-08-28T22:24:11.399Z" }