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Monetary compensation schemes during the COVID-19 pandemic: Implications for household incomes, liquidity constraints and consumption across the EU

Author

Listed:
  • Michael Christl

    (Joint Research Centre (JRC), European Commission)

  • Silvia De Poli

    (Joint Research Centre (JRC), European Commission)

  • Francesco Figari

    (University of Insubria)

  • Tine Hufkens

    (Joint Research Centre (JRC), European Commission)

  • Chrysa Leventi

    (Athens University of Economics and Business)

  • Andrea Papini

    (Joint Research Centre (JRC), European Commission)

  • Alberto Tumino

    (Joint Research Centre (JRC), European Commission)

Abstract

This paper analyses the effect of the COVID-19 pandemic on household disposable income and household demand in the European Union (EU) during 2020, making use of theEU microsimulation model EUROMOD and nowcasting techniques. We show evidence ofheterogeneity in the impact of the COVID-19 pandemic on the labour markets in EU Member States, with some countries hit substantially harder than others. Most EU MemberStates experience a large drop in market incomes, with poorer households hit the hardest.Tax-benefit systems cushioned significantly the transmission of the shock to the disposableincome and the household demand, with monetary compensation schemes playing a majorrole. Additionally, we show that monetary compensation schemes prevent a significantshare of households from becoming liquidity constrained during the pandemic.

Suggested Citation

  • Michael Christl & Silvia De Poli & Francesco Figari & Tine Hufkens & Chrysa Leventi & Andrea Papini & Alberto Tumino, 2022. "Monetary compensation schemes during the COVID-19 pandemic: Implications for household incomes, liquidity constraints and consumption across the EU," Working Papers 613, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2022-613
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    References listed on IDEAS

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    Cited by:

    1. Astarita, Caterina & Alcidi, Cinzia, 2022. "Did the COVID-19 pandemic impact income distribution?," MPRA Paper 113851, University Library of Munich, Germany.
    2. Alina CIUREA (MECA), 2022. "Impact of European Union Social Policy during Pandemic on Household Income," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 117-124.

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    More about this item

    Keywords

    COVID-19; Inequality; Microsimulation; EUROMOD; compensation schemes; liquidity constraints; consumption; income stabilizers;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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