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The Role of Automatic Stabilizers and Emergency Tax–Benefit Policies During the COVID-19 Pandemic: Evidence from Ecuador

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  • H. Xavier Jara

    (University of Essex)

  • Lourdes Montesdeoca

    (Facultad Latinoamericana de Ciencias Sociales (FLACSO) Sede Ecuador)

  • Iva Tasseva

    (London School of Economics and Political Science)

Abstract

By combining household survey data before and during the COVID-19 pandemic with detailed tax-benefit simulations, this paper quantifies the distributional effects of COVID-19 in Ecuador and the role of tax–benefit policies in mitigating the immediate impact of the economic shocks. Our results show a dramatic increase in income poverty and inequality between December 2019 and June 2020, the period when the economy was hit the hardest. The national poverty headcount increases from 25.7 to 58.2%, the extreme poverty headcount from 9.2 to 38.6%, and the Gini coefficient from 0.461 to 0.592. On average, household disposable income drops by 41%. The new Family Protection Grant provides income protection for the poorest income decile. However, overall tax–benefit policies do little to mitigate the losses in household incomes due to the pandemic. Informal workers, in particular, are left unprotected due to the lack of income support in the event of unemployment.

Suggested Citation

  • H. Xavier Jara & Lourdes Montesdeoca & Iva Tasseva, 2022. "The Role of Automatic Stabilizers and Emergency Tax–Benefit Policies During the COVID-19 Pandemic: Evidence from Ecuador," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2787-2809, December.
    • Handle: RePEc:pal:eurjdr:v:34:y:2022:i:6:d:10.1057_s41287-021-00490-1
    DOI: 10.1057/s41287-021-00490-1
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    More about this item

    Keywords

    COVID-19; Microsimulation; Poverty; Inequality; Ecuador;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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