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Monetary compensation schemes during the COVID-19 pandemic: implications for household incomes, liquidity constraints and consumption across the EU

Author

Listed:
  • Michael Christl

    (Joint Research Centre (JRC), European Commission
    Loyola University Andalusia)

  • Silvia De Poli

    (Joint Research Centre (JRC), European Commission)

  • Francesco Figari

    (University of Eastern Piedmont)

  • Tine Hufkens

    (Joint Research Centre (JRC), European Commission)

  • Chrysa Leventi

    (Joint Research Centre (JRC), European Commission)

  • Andrea Papini

    (Joint Research Centre (JRC), European Commission)

  • Alberto Tumino

    (Joint Research Centre (JRC), European Commission)

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.

Suggested Citation

  • Michael Christl & Silvia De Poli & Francesco Figari & Tine Hufkens & Chrysa Leventi & Andrea Papini & Alberto Tumino, 2024. "Monetary compensation schemes during the COVID-19 pandemic: implications for household incomes, liquidity constraints and consumption across the EU," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 22(2), pages 411-431, June.
    • Handle: RePEc:spr:joecin:v:22:y:2024:i:2:d:10.1007_s10888-023-09596-4
    DOI: 10.1007/s10888-023-09596-4
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    Cited by:

    1. Astarita, Caterina & Alcidi, Cinzia, 2022. "Did the COVID-19 pandemic impact income distribution?," MPRA Paper 113851, University Library of Munich, Germany.
    2. Alina CIUREA (MECA), 2022. "Impact of European Union Social Policy during Pandemic on Household Income," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 117-124.

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    More about this item

    Keywords

    COVID-19; Inequality; Liquidity constraints; Consumption; Microsimulation; EUROMOD;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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