Underestimating the Pandemic: The Impact of COVID-19 on Income Distribution in the U.S. and Brazil

Abstract

The COVID-19 pandemic has exposed individuals to various risks, including job loss, income reduction, deteriorating well-being, and severe health complications and death. In Brazil and the U.S., as well as in other countries, the initial response to the pandemic was marked by governmental underestimation, leading to inadequate public health measures to curb the spread of the virus. Although progressively mitigated, this approach played a crucial role in the impacts on local populations. Therefore, the principal aim of this paper is to evaluate the impact of COVID-19 and, indirectly, of the policies adopted by the U.S. and the Brazilian governments to prevent pandemic diffusion on income distribution. Utilizing available microdata and employing novel econometric methods (RIF-regression for inequality measures) this study shows that growth in COVID-19 prevalence significantly exacerbates economic disparities. Furthermore, the impact of COVID-19 on inequality has increased over time, suggesting that this negative impact has been intensifying. In the U.S., results indicate that working from home, the inability to work, and barriers to job-seeking significantly increase inequalities. Although further data are necessary to validate the hypothesis, this preliminary evidence suggests that the pandemic has significantly contributed to increased inequality in these two countries already characterized by increasing polarization and significant social disparities.