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 the EU microsimulation model EUROMOD and nowcasting techniques. We show evidence of heterogeneity 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 Member States experience a large drop in market incomes, with poorer households bearing the brunt. Tax-benefit systems cushioned significantly the transmission of the shock to the disposable income and the household demand, with monetary compensation schemes playing a major role. Additionally, we show that monetary compensation schemes prevent a significant share of households from becoming liquidity constrained during the pandemic.
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Data Availability Statement
The data that support the findings of this study are available from Eurostat but restrictions apply to the availability of these data. Data are however available from the authors upon reasonable request and with permission of Eurostat.
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Figari acknowledges the support from CARIPLO Foundation through the program Post-COVID. The other authors did not receive support from any organization for the submitted work.
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An analysis of the impact of COVID-19 on household income in the Euro Area with different data and different time-horizons was included in the Quarterly Report on the Euro Area (QREA), 2022, Vol 20(4), Chapter one, European Commission. The content of this article does not reflect the official opinion of the European Commission. Responsibility for the information and views expressed in the article lies entirely with the author(s). The authors are indebted to the many people who have contributed to the development of EUROMOD and the LMA add-on, especially the EUROMOD developers at the JRC and the University of Essex, the EUROMOD national teams and the flash estimates team in EUROSTAT for providing us with data, in particular Aura Leulescu, Mihaela Agafitei, Andrea Gallelli, Adriano Di Guglielmo and Francesca Demontis. A special mention goes to Salvador Barrios, Ana Agúndez, Simone Salotti and Andrzej Stasio for their helpful comments and advice. F. Figari acknowledges the support from CARIPLO Foundation through the program Post-COVID. Part of this research was conducted while S. De Poli was visiting the University of Eastern Piedmont.
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Christl, M., De Poli, S., Figari, F. et al. Monetary compensation schemes during the COVID-19 pandemic: implications for household incomes, liquidity constraints and consumption across the EU. J Econ Inequal 22, 411–431 (2024). https://doi.org/10.1007/s10888-023-09596-4
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DOI: https://doi.org/10.1007/s10888-023-09596-4