From Middle Class to Poverty : The Unequal Impacts of the COVID-19 Pandemic on Developing Countries

This study combines pre-COVID-19 household surveys with 2020 macro data to simulate changesin household economic welfare and poverty rates through job losses, labor income changes, and non-labor (remittance)income changes during 2020 in Brazil, Sri Lanka, the Philippines, South Africa, and Türkiye. It first presentsan in-depth analysis of employment elasticities projections—acritical input in microsimulations—for 15 developing countries. In 11 of the 15 countries, employment estimatesfor 2020 based on elasticities were within 5 percent of the actual employment level, but in four countries, where thelabor markets were more disrupted by the pandemic, the projections considerably underestimated job losses due tothe crisis. The study then presents the simulation results for the five countries, which show declines in per capitahousehold income or consumption across the distribution, a decline in the middle class, and increased poverty, but noother clear pattern of impacts across the different quintiles. Finally, data from Brazil indicate that thesimulation underestimated the magnitude of the shock throughout the distribution, especially for the wealthy,because it underestimated declines in earnings.