Underestimating the pandemic: the Impact of Covid-19 on Income Distribution in US and Brazil

Abstract

Abstract The COVID-19 has exposed people to different risks, increasing the chances of losing jobs and income, worsening well-being levels, as well as developing serious health problems or death. In Brazil and US, at least in the first phases, the respective governments underestimated the extent of the pandemic, employing policies not adequately pointed at reducing the virus diffusion and at improving the public health system. This attitude, progressively mitigated, probably assumed an important role on the pandemic impact dimension on the local population. Employing novel econometric methods on available microdata, emerges that a growth in COVID-19 prevalence significantly increases economic disparities. Also, the impact of COVID-19 on inequality increases over time, suggesting that this negative impact has intensified over the time. In the U.S., the results suggest that working from home, being unable to work or being prevented from seeking work significantly increases inequalities. Although more data are needed to validate the hypothesis, it is concluded that based on this preliminary evidence, the pandemic has significantly contributed to the inequality growth in two countries already characterized by increasing polarization and high degrees of social disparities. JEL codes: D63, N30, P36