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Too little but not too late: nowcasting poverty and cash transfers’ incidence during COVID-19’s crisis

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  • Brum, Matias
  • De Rosa, Mauricio

Abstract

The economic crisis triggered by COVID-19 has caused a world-wide economic downturn, and the deepest GDP contraction in Latin America since the beginning of the XXth century. One of the most dramatic outcomes of the crisis is the increase in poverty, but its extent will remain unknown until household income data is collected and analyzed. We propose a simple approach to provide early estimates, micro-simulating the short-run effect of the crisis on the poverty rate. It combines household level micro-data, estimates on the feasibility of working from home, information on key public policies (e.g., cash-transfers, unemployment insurance), and forecasts of GDP contraction. This approach, which can be easily adapted and applied to different countries, allows to nowcast the current poverty level and the poverty-reducing effect of public policies, while providing full micro-macro consistency between heterogeneous impacts on households and the shock to aggregate GDP. Moreover, it enables to estimate the effect on informal and self-employed workers, of utmost importance in developing countries. We illustrate the methodology with an application for Uruguay, finding that during the first full trimester of the crisis, the poverty rate grew by more than 38%, reaching 11.8% up from 8.5%. Moreover, cash transfers implemented by the government in the period had a positive but very limited effect in mitigating this poverty spike, which could be neutralized with additional transfers worth under 0.5% of Uruguay’s annual GDP.

Suggested Citation

  • Brum, Matias & De Rosa, Mauricio, 2021. "Too little but not too late: nowcasting poverty and cash transfers’ incidence during COVID-19’s crisis," World Development, Elsevier, vol. 140(C).
  • Handle: RePEc:eee:wdevel:v:140:y:2021:i:c:s0305750x20303545
    DOI: 10.1016/j.worlddev.2020.105227
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    Cited by:

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    2. Amarante, Verónica, 2022. "Fortalecimiento de los sistemas de protección social de la región: aprendizajes a partir de la pandemia de COVID-19," Documentos de Proyectos 47830, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Luis Huesca & Linda Llamas & H. Xavier Jara & César O. Vargas Téllez & David Rodríguez, 2021. "The impact of the COVID-19 pandemic on poverty and inequality in Mexico," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(3), pages 1-19, Julio - S.

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    More about this item

    Keywords

    COVID-19; Nowcasting; Poverty; Microsimulations; Latin America; Uruguay;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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