Differences in COVID-19 Policies and Income Distribution: A Cross-Country Comparison

Abstract

This paper looks at the distribution of disposable income by deciles to indicate how specific mitigating measures have influenced income groups and considers the effectiveness of different combinations of containment measures in the European Union. Simulations using the EUROMOD tax-benefit microsimulation model imply that the mitigating effects of the simulated measures are regressive, with a bigger influence on the bottom part of the income distribution. It is also observed that old democracies benefit from these measures more than new democracies. Surprisingly, our results further reveal that for the two highest decile income groups, the COVID-19 containment measures are stronger in new democracies. Finally, a qualitative comparative analysis of 19 EU countries suggests that each country should apply mixes of containment measures that fit its own context. Although there is no one-size-fits-all policy, old democracies seem more successful at handling the consequences of the COVID-19 crisis than new democracies. This study complements the literature as it shows how COVID-19 measures have influenced household income groups, and second, it adds to earlier studies by clarifying that only specific context-dependent combinations of containment measures are successful at preventing the loss of people’s living standards, thereby giving policymakers the necessary leeway to formulate effective policies.