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

The Covid-19 emergency has provided a shock to societies unlike anything in recent memory. Often lacking good information, governments have had to formulate policy responses in a fog of uncertainty. The policy-imposed shutdown has had significant implications for the income of households, with differing effects across the income distribution. Governments have responded with temporary income support policies, including enhanced unemployment payments, wage subsidies and Covid-related illness benefits. There are also been some positive effects on the cash flow for households from the reduction in work-related expenditures, especially given the large number of people now working from home. Governments rely on modelling to predict the distributional impact of such supports and policy responses. With that in mind, this research develops a Microsimulation-Nowcasting model for Ireland to help understand and predict the income distribution implications of the emergency in close to real time.