Working Paper: NBER ID: w28392
Authors: Angus Deaton
Abstract: There is a widespread belief that the COVID-19 pandemic has increased global income inequality, reducing per capita incomes by more in poor countries than in rich. This supposition is reasonable but false. Rich countries have experienced more deaths per head than have poor countries; their better health systems, higher incomes, more capable governments and better preparedness notwithstanding. The US did worse than some rich countries, but better than several others. Countries with more deaths saw larger declines in income. There was thus not only no trade-off between lives and income; fewer deaths meant more income. As a result, per capita incomes fell by more in higher-income countries. Country by country, international income inequality decreased. When countries are weighted by population, international income inequality increased, more in line with the original intuition. This was largely because Indian incomes fell, and because the disequalizing effect of declining Indian incomes was not offset by rising incomes in China, which is no longer a globally poor country. That these findings are a result of the pandemic is supported by comparing global inequality using IMF forecasts in October 2019 and October 2020.
Keywords: COVID-19; global income inequality; economic impact; income distribution
JEL Codes: F01; I14; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| COVID-19 pandemic (H12) | global income inequality (F61) |
| higher COVID-19 death counts (I12) | larger declines in income (E25) |
| decrease in international income inequality (F61) | not increased global income inequality (F61) |
| substantial decline in incomes in India (F61) | increase in international income inequality (F61) |
| IMF forecasts (F37) | observed trends in global inequality (F61) |