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Consequences of the Covid-19 Pandemic for Economic Inequality

Abstract

The impact of the COVID-19 pandemic is likely to increase various forms of economic inequality in wealth and income. This is because the income of the poor was adversely affected more, both because of the already present technology driven trends in unskilled labour substitution, but also because the types of employment that the world’s poor engage in was most severely disrupted by COVID-19, and the subsequent public health response. This is in contrast to medieval pandemics, which tended to increase the wage-rental ratio. Certain countervailing income and job protection schemes can help, but it is mainly a short-term palliative. Population weighted international inequality has also increased. Unless checked, further increases in inequality will strengthen recent trends in illiberal, populist, governance.

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Fig. 5.1

Notes

  1. 1.

    This work will concern itself with inequality and not poverty. Increases in poverty due to the pandemic merit independent analyses; with falling output and rising inequality, poverty is bound to increase.

  2. 2.

    According to Piketty (2014), the accelerating trend in inequality mainly stems from wealth inequality. There is a tendency for wealth to national income ratios to increase since the 1970s; wealth, whose ownership is more concentrated than income, multiplies faster than wage income creating an ever widening gap between capital and labour, the biggest source of inequality.

  3. 3.

    The GINI coefficient is the sum of differences of all incomes or income groups from the mean or average income. It is usually computed to range from 0 to 100, with the former implying perfect equality, and the latter perfect inequality, such that increases in the GINI imply more inequality.

  4. 4.

    The Black Death may have killed up to half the population in England and a third of the Italian population; Scheidel (2017).

  5. 5.

    Milanovic (2016), in contrast to Scheidel (2017), argues that income inequality, especially in the UK, began falling well before 1914.

  6. 6.

    See Gans (2020) on dark recessions.

  7. 7.

    Purchasing power parity controls for differences in the cost of living internationally, compared to the United States. Thus, poorer countries, where the cost of living is lower get assigned a greater income compared to market exchange rates which tend to devalue living standards in poorer countries.

  8. 8.

    With per-capita incomes a lot hinges on the PPP exchange rate year employed; the methodology of household surveys also raises issues because in some countries (developing Asia minus China , Africa) household income is made equivalent to household expenditure.

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Murshed, S.M. (2022). Consequences of the Covid-19 Pandemic for Economic Inequality . In: Papyrakis, E. (eds) COVID-19 and International Development. Springer, Cham. https://doi.org/10.1007/978-3-030-82339-9_5

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