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

Bronka, Patryk and Collado, Diego and Richiardi, Matteo (2020) The Covid-19 crisis response helps the poor: the distributional and budgetary consequences of the UK lockdown. Discussion Paper. CEPR, Covid Economics, Vetted and Real Time papers.

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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.

Item Type: Monograph (Discussion Paper)
Additional Information: Also available in EUROMOD Working Paper SeriesEM11/20 and CeMPA Working Paper Series, CEMPA5/20
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Institute for Social and Economic Research
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 17 May 2021 13:33
Last Modified: 06 Jan 2022 14:24
URI: http://repository.essex.ac.uk/id/eprint/30367

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