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Income Declines during COVID-19

Author

Listed:
  • Jeff Larrimore
  • Jacob Mortenson
  • David Splinter

Abstract

The COVID-19 recession caused regressive market income changes in the United States, with large losses more frequent than during the Great Recession and more concentrated at the bottom of the distribution. Progressive taxes and transfers, especially from expanded unemployment insurance benefits and stimulus checks, dramatically offset these declines. We use administrative tax data to show that public policies made large annual tax-unit level income declines in 2020 less common than during the Great Recession, as well as 2019, an expansionary year. These policies stabilized incomes over the entire distribution, but this effect was strongest among those starting with low incomes.

Suggested Citation

  • Jeff Larrimore & Jacob Mortenson & David Splinter, 2022. "Income Declines during COVID-19," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 340-344, May.
    • Handle: RePEc:aea:apandp:v:112:y:2022:p:340-44
    DOI: 10.1257/pandp.20221042
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    Cited by:

    1. Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2023. "Earnings business cycles: The Covid recession, recovery, and policy response," Journal of Public Economics, Elsevier, vol. 225(C).
    2. Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2022. "Earnings shocks and stabilization during COVID-19," Journal of Public Economics, Elsevier, vol. 206(C).

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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