Modelling the Distributional Impact of the COVID-19 Crisis

Cathal O'Donoghue; Denisa Sologon; Iryna Kyzyma; John McHale

doi:10.1111/1475-5890.12231

Modelling the Distributional Impact of the COVID-19 Crisis

Cathal O'Donoghue
, Denisa Sologon
, Iryna Kyzyma
, John McHale

Living Conditions

Research output: Contribution to journal › Article › peer-review

Abstract

The COVID-19 emergency has had a dramatic impact on market incomes and income support policies. The lack of timely available data constrains the estimation of the scale and direction of recent changes in the income distribution, which in turn constrain policymakers seeking to monitor such developments. We overcome the lack of data by proposing a dynamic calibrated microsimulation approach to generate counterfactual income distributions as a function of more timely external data than is available in dated income surveys. We combine nowcasting methods using publicly available data and a household income generation model to perform the first calibrated simulation based upon actual data aiming to assess the distributional implications of the COVID-19 crisis in Ireland. Overall, we find that the crisis had an equalizing real-time effect for both gross and disposable incomes, notwithstanding the significant hardship experienced by many households.

Original language	English
Pages (from-to)	321-336
Journal	Fiscal Studies
Volume	41
Issue number	2
Early online date	17 Jun 2020
DOIs	https://doi.org/10.1111/1475-5890.12231
Publication status	Published - 30 Jun 2020

Bibliographical note

This article won the 2020 Miriam Herderman O’Brien Prize.
The Miriam Hederman O’Brien prize is awarded by the Foundation for Fiscal Studies in association with The Irish Times to recognise outstanding work in the area of Irish fiscal policy. The aim of the prize is to promote the study and discussion of matters relating to fiscal, economic and social policy, particularly among new contributors to these fields, and to reward those who demonstrate exceptional research promise. The prize forms an important part of the Foundation’s overall objective of promoting more widely the study and discussion of matters relating to fiscal, economic and social policy.

Keywords

COVID-19
nowcasting
microsimulation
inequality
income generation model
income distribution
fiscal policy
distributional impact

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10.1111/1475-5890.12231

Cite this

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title = "Modelling the Distributional Impact of the COVID-19 Crisis",

abstract = "The COVID-19 emergency has had a dramatic impact on market incomes and income support policies. The lack of timely available data constrains the estimation of the scale and direction of recent changes in the income distribution, which in turn constrain policymakers seeking to monitor such developments. We overcome the lack of data by proposing a dynamic calibrated microsimulation approach to generate counterfactual income distributions as a function of more timely external data than is available in dated income surveys. We combine nowcasting methods using publicly available data and a household income generation model to perform the first calibrated simulation based upon actual data aiming to assess the distributional implications of the COVID-19 crisis in Ireland. Overall, we find that the crisis had an equalizing real-time effect for both gross and disposable incomes, notwithstanding the significant hardship experienced by many households.",

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Modelling the Distributional Impact of the COVID-19 Crisis

Abstract

Bibliographical note

Keywords

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Modelling real-time changes to income distribution during the Covid-19 emergency

Modelling the Distributional Impact of the COVID-19 Crisis

Cite this