Epidemics, Pandemics and Income Inequality

The novel coronavirus is part of a series of infectious disease outbreaks that include: Ebola, Avian influenza, Middle East respiratory syndrome coronavirus (MERS-CoV), Influenza A (H1N1), and others. This paper addresses the question of how do these epidemics and pandemics affect income inequality in countries around the world during the first two decades of the 21st century. To achieve its objective, the paper explores the effect on the Gini coefficient of a dummy variable that indicates the occurrence of an epidemic or a pandemic in a country in a given year, in addition to the fatality rate of the epidemic or the pandemic. The panel estimations show that the dummy variable has a statistically significant positive effect on income inequality, while the fatality rate does not have a statistically significant nor an economically important effect on income inequality. To properly address potential endogeneity, we implement a Three-Stage-Least Squares technique. The estimation shows that both epidemics indicators have a statistically significant positive effect on income inequality, while income inequality does not have a statistically significant effect on the epidemics and pandemics indicators.