The Covid-19 crisis response helps the poor: the distributional and budgetary consequences of the UK lockdown

Authors

Patryk Bronka, Diego Collado, Matteo Richiardi

Publication Date

Jun 2020

Abstract

We nowcast the economic effects of the Covid-19 pandemic and related lockdown measures in the UK and then analyse the distributional and budgetary effects of the estimated individual income shocks, distinguishing between the effects of automatic stabilisers and those of the emergency policy responses. Under conservative assumptions about the exit strategy and recovery phase, we predict that the rescue package will increase the cost of the crisis for the public budget by an additional £26 billion, totalling over £60 billion. However, it will allow to contain the reduction in the average household disposable income to 1 percentage point, and will reduce poverty rate by 1.1 percentage points (at a constant poverty line), with respect to the pre-Covid situation. We also show that this progressive effect is due to the increased generosity of Universal Credit, which accounts for only 20% of the cost of the rescue package.

Volume and page numbers

Volume: 26 , p.79 -106

Publication type

Journal Article

Research areas

Health and wellbeing, Tax and benefit systems

Links

Covid Economics (list of issues) - https://cepr.org/content/covid-economics-vetted-and-real-time-papers-0#block-block-10

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• The Covid-19 crisis response helps the poor: the distributional and budgetary consequences of the UK lock-down

  Patryk Bronka, Diego Collado, Matteo Richiardi, CeMPA Working Paper Series -29 Jun 2020

• The Covid-19 crisis response helps the poor: the distributional and budgetary consequences of the UK lock-down

  Patryk Bronka, Diego Collado, Matteo Richiardi, EUROMOD Working Paper Series -09 Jun 2020

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