The Impact of COVID-19 Economic Shock on Inequality and Poverty in Mexico

Based on the economic sector in which household members work, we use microsimulation to estimate the distributional consequences of the COVID-19 pandemic in Mexico. Although the predicted increase in poverty is significant, we find that the worst effects may not be on the poorest, but those (roughly) in the middle deciles of the ex ante income distribution: the moderate poor and those vulnerable to falling below the poverty line if subject to an adverse shock. We estimate that the economic shock could induce significantly less increase in poverty in rural areas and among the indigenous population. The increase in poverty seems to be similar for male- and female-headed households. Compared to other countries, Mexico stands out because of the absence of mitigation policies. In contrast, in Argentina and Brazil, the expanded social assistance seems to significantly offset the impact of the economic dislocation.