Working Paper: NBER ID: w29597
Authors: Arpit Gupta; Anup Malani; Bartosz Woda
Abstract: We use a large, representative panel data set from India with monthly data on household finances to examine the incidence of economic harms during the COVID pandemic. We observe a sharp spike in poverty, peaking during India's sharp but short lockdown. However, there was a striking decrease in income inequality outside the lockdown. There was a smaller decrease in consumption inequality, likely due to consumption smoothing. Evidence supports two mechanisms for the decline in income inequality: the capital income of top-quartile earners covaries more with aggregate income, and demand for labor fell more for higher quartiles.
Keywords: Inequality; COVID-19; India; Poverty
JEL Codes: I15; O15; O53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| COVID pandemic (H12) | decline in income inequality (D31) |
| higher income quartiles (D31) | larger relative reductions in income (D31) |
| capital income of top-quartile earners covaries with aggregate income (E25) | susceptibility to downturns (E32) |
| demand for labor fell more for higher income quartiles (J29) | decline in income inequality (D31) |
| pandemic's economic impact (F69) | significant reductions in inequality (I24) |
| individual income changes (D31) | influenced by changes in income at percentile and shifts in percentile rankings (D31) |
| Gini coefficient spiked during lockdown (D31) | return to pre-pandemic levels afterward (P27) |