Income Distribution and the Effect of Public Transfers, Before and After COVID-19

Abstract

To better respond in the future to such large-scale economic crises as the one caused by the COVID-19 pandemic, strategies should be developed based on a thorough assessment of the pandemic’s effects on income and poverty and a precise evaluation of the extent to which disaster relief payments and the National Basic Living Security Scheme mitigated these effects. The pandemic in its early stage had negative effects on market income levels and the poverty rate; however, by 2021, these effects had diminished. COVID-19’s impact on market income did not lead to a disposable income shock, thanks to public transfers. Our analysis suggests that to respond effectively and efficiently to future economic crises, the policy focus should shift from the traditional, targeted income protection approaches—such as those concentrating support on older persons and those in poverty—to a universal application of social insurance, specifically a major expansion of employment insurance coverage.