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Wage inequality and poverty effects of lockdown and social distancing in Europe

Author

Listed:
  • Juan C. Palomino

    (University of Oxford (UK), INET and Department of Social Policy and Intervention)

  • Juan G. Rodríguez

    (Universidad Complutense de Madrid (Spain), EQUALITAS, ICAE and CEDESOG)

  • Raquel Sebastian

    (Universidad Complutense de Madrid (Spain), EQUALITAS and ICAE)

Abstract
Social distancing and lockdown measures taken to contain the spread of COVID-19 may have distributional economic costs beyond the contraction of GDP. Here we evaluate the capacity of individuals to work under a lockdown based on a Lockdown Working Ability index which considers their teleworking capacity and whether their occupation is essential or closed. Our analysis reveals substantial and uneven potential wage losses across the distribution all around Europe and we consistently find that both poverty and wage inequality rise in all European countries. Under four different scenarios (2 months of lockdown and 2 months of lockdown plus 6 months of partial functioning of closed occupations at 80%, 70% and 60% of full capacity) we estimate for 29 European countries an average increase in the headcount poverty index that goes from 4.9 to 9.4 percentage points and a mean loss rate for poor workers between 10% and 16.2%. The average increase in the Gini coefficient ranges between 3.5% to 7.3% depending on the scenario considered. Decomposing overall wage inequality in Europe, we find that lockdown and social distance measures produce a double process of divergence: both inequality within and between countries increase.

Suggested Citation

  • Juan C. Palomino & Juan G. Rodríguez & Raquel Sebastian, 2020. "Wage inequality and poverty effects of lockdown and social distancing in Europe," Documentos de Trabajo del ICAE 2020-03, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    • Handle: RePEc:ucm:doicae:2003
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    File URL: https://eprints.ucm.es/id/eprint/60824/1/2003.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Wage inequality; Teleworking; Social distancing; Europe; COVID.;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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