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Estimating the Impact of Covid-19 and Policy Responses on Australian Income Distribution Using Incomplete Data

Author

Listed:
  • Jinjing Li

    (University of Canberra)

  • Yogi Vidyattama

    (University of Canberra)

  • Hai Anh La

    (University of Canberra)

  • Riyana Miranti

    (University of Canberra)

  • Denisa M. Sologon

    (Luxembourg Institute of Socio-Economic Research)

Abstract
This paper undertakes a near real-time analysis of the income distribution effects of the Covid-19 crisis in Australia to understand the ongoing changes in the income distribution as well as the impact of policy responses. By semi-parametrically combining incomplete observed data from three different sources–the monthly Longitudinal Labour Force Survey, the Survey of Income and Housing and administrative payroll data–we estimate the impact of Covid-19 on the Australian income distribution and decompose its impact into the income shock effect and the policy effect between February and June 2020, covering the immediate periods before and after the initial Covid-19 outbreak. Our results suggest that, despite growth in unemployment, the Gini coefficient of equivalised household disposable income dropped by more than 0.02 points between February and June 2020. This reduction is due to the additional wage subsidies and welfare supports offered as part of the policy response, offsetting the increase in income inequality from the income shock effect. The results shows the effectiveness of temporary policy measures both in maintaining living standards and avoiding increases in income inequality. However, the heavy reliance on the support measures shown in the modelling raises the possibility that the changes in the income distribution may be reversed, or even that inequality and living standards could substantially worsen once the measures are withdrawn.

Suggested Citation

  • Jinjing Li & Yogi Vidyattama & Hai Anh La & Riyana Miranti & Denisa M. Sologon, 2022. "Estimating the Impact of Covid-19 and Policy Responses on Australian Income Distribution Using Incomplete Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(1), pages 1-31, July.
    • Handle: RePEc:spr:soinre:v:162:y:2022:i:1:d:10.1007_s11205-021-02826-0
    DOI: 10.1007/s11205-021-02826-0
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    References listed on IDEAS

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    14. Jinjing Li & Hai Anh La & Denisa M. Sologon, 2021. "Policy, Demography, and Market Income Volatility: What Shaped Income Distribution and Inequality in Australia Between 2002 and 2016?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(1), pages 196-221, March.
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    Cited by:

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    2. Shiqi Jiang & Lingli Qi & Xinyue Lin, 2022. "The Impacts of COVID-19 Shock on Intergenerational Income Mobility: Evidence from China," IJERPH, MDPI, vol. 19(18), pages 1-20, September.
    3. O'Donoghue, Cathal & Sologon, Denisa Maria, 2023. "The Transformation of Public Policy Analysis in Times of Crisis – A Microsimulation-Nowcasting Method Using Big Data," IZA Discussion Papers 15937, Institute of Labor Economics (IZA).
    4. Glenn Abela, 2022. "Assessing the impacts of the COVID-19 wage supplement scheme: A microsimulation study," CBM Working Papers WP/06/2022, Central Bank of Malta.
    5. Gary Cornwall & Marina Gindelsky, 2024. "Nowcasting Distributional National Accounts for the United States: A Machine Learning Approach," BEA Papers 0130, Bureau of Economic Analysis.
    6. Vidyattama, Yogi & Tanton, Robert & Sinclair, Darren & Schirmer, Jacki, 2024. "Simulating electric vehicle policy in the Australian capital territory," Transport Policy, Elsevier, vol. 149(C), pages 91-99.
    7. Jules Linden & Cathal O’Donoghue & Denisa M. Sologon, 2023. "Decomposing the distributional impact of carbon taxation across six EU countries - Comparing the role of budget shares, carbon intensity, savings rates, and asset ownership," LISER Working Paper Series 2023-10, Luxembourg Institute of Socio-Economic Research (LISER).

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    More about this item

    Keywords

    Covid-19; Nowcasting; Income inequality; Australia;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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