The Impact of the COVID-19 Shock on Labour Income Inequality: Evidence from Italy

31 Pages Posted: 19 Apr 2021

Date Written: February 12, 2021

Abstract

The spread of the pandemic and the consequent adoption of lockdown measures to prevent infections had severe consequences for business activity and employment. By using data from the Italian Labour Force Survey, this paper simulates the effect of the COVID-19 crisis on the dynamics and distribution of equivalized labour income in the first two quarters of 2020. Moreover, it assesses the effectiveness in smoothing labour income losses of the social insurance benefits that were in place before the crisis and of the temporary measures adopted by the Italian Government to face it. We find that the economic repercussions of the COVID-19 shock impacted low-income households more heavily than higher income families, implying a substantial increase in labour income inequality. However, our results show that the social insurance benefits temporarily introduced by the Italian Government were able, at least in the short term, to compensate for these income losses and for the increased inequality significantly more than the pre-crisis measures.

Keywords: labour market, inequality, social insurance benefits, recessions, coronavirus, Covid-19

JEL Classification: H20, J20, D31

Suggested Citation

Carta, Francesca and de Philippis, Marta, The Impact of the COVID-19 Shock on Labour Income Inequality: Evidence from Italy (February 12, 2021). Bank of Italy Occasional Paper No. 606, Available at SSRN: https://ssrn.com/abstract=3828129 or http://dx.doi.org/10.2139/ssrn.3828129

Francesca Carta (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Marta De Philippis

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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