COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis

COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis

In this note we estimate the short-term economic impact of the COVID-19 crisis on Brazilian families vis-a-vis labor shocks. The analysis, using a microsimulation model which incorporates subnational shocks from a computable general equilibrium gro...

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Main Authors: Cereda, Fabio, Rubiao, Rafael M., Sousa, Liliana D.
Format: Policy Note
Language:English
Published: World Bank, Washington, DC 2020
Subjects:
CORONAVIRUS
COVID-19
LABOR MARKET
POVERTY
UNEMPLOYMENT
PANDEMIC IMPACT
INFORMAL SECTOR
INEQUALITY
INCOME DISTRIBUTION
SOCIAL PROTECTION
Online Access:http://documents.worldbank.org/curated/en/883191597258941357/COVID-19-Labor-Market-Shocks-and-Poverty-in-Brazil-A-Microsimulation-Analysis
http://hdl.handle.net/10986/34372
id okr-10986-34372
recordtype oai_dc
spelling okr-10986-343722021-05-25T09:58:09Z COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis Cereda, Fabio Rubiao, Rafael M. Sousa, Liliana D. CORONAVIRUS COVID-19 LABOR MARKET POVERTY UNEMPLOYMENT PANDEMIC IMPACT INFORMAL SECTOR INEQUALITY INCOME DISTRIBUTION SOCIAL PROTECTION In this note we estimate the short-term economic impact of the COVID-19 crisis on Brazilian families vis-a-vis labor shocks. The analysis, using a microsimulation model which incorporates subnational shocks from a computable general equilibrium growth model, shows that over 30 million workers in Brazil may see significant reductions in their labor income in 2020 due to the COVID-19 pandemic. Two-thirds of these workers are informal workers or own-account workers, groups without access to unemployment protection. These household shocks would reduce average per capita income by 7.6 percent, with the largest impact on the second and third quintiles of the income distribution. These income shocks are inequality-increasing: without any mitigation measures, inequality would increase by 4 percent. The country’s first line of defense, its existing unemployment insurance system, reduces the income shock to 5.3 percent. Even so, an additional 8.4 million Brazilians could fall into poverty. The policy responses announced by the government, and particularly the Auxilio Emergencial (AE) transfer, have the potential to fully absorb the labor income shock for the poorest 40 percent and reduce poverty. Yet, these results reflect annualized income, obscuring the sharp reduction in monthly income if demand shocks persist after the AE ends. Looking towards the next phase of the response, considering extensions of AE that are either less generous or more restricted provide a fiscally prudent approach for continuing to support Brazil’s most vulnerable. 2020-08-20T18:59:40Z 2020-08-20T18:59:40Z 2020-07-31 Policy Note http://documents.worldbank.org/curated/en/883191597258941357/COVID-19-Labor-Market-Shocks-and-Poverty-in-Brazil-A-Microsimulation-Analysis http://hdl.handle.net/10986/34372 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work Economic & Sector Work :: Policy Note Latin America & Caribbean Brazil
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic CORONAVIRUS
COVID-19
LABOR MARKET
POVERTY
UNEMPLOYMENT
PANDEMIC IMPACT
INFORMAL SECTOR
INEQUALITY
INCOME DISTRIBUTION
SOCIAL PROTECTION
spellingShingle CORONAVIRUS
COVID-19
LABOR MARKET
POVERTY
UNEMPLOYMENT
PANDEMIC IMPACT
INFORMAL SECTOR
INEQUALITY
INCOME DISTRIBUTION
SOCIAL PROTECTION
Cereda, Fabio
Rubiao, Rafael M.
Sousa, Liliana D.
COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis
geographic_facet Latin America & Caribbean
Brazil
description In this note we estimate the short-term economic impact of the COVID-19 crisis on Brazilian families vis-a-vis labor shocks. The analysis, using a microsimulation model which incorporates subnational shocks from a computable general equilibrium growth model, shows that over 30 million workers in Brazil may see significant reductions in their labor income in 2020 due to the COVID-19 pandemic. Two-thirds of these workers are informal workers or own-account workers, groups without access to unemployment protection. These household shocks would reduce average per capita income by 7.6 percent, with the largest impact on the second and third quintiles of the income distribution. These income shocks are inequality-increasing: without any mitigation measures, inequality would increase by 4 percent. The country’s first line of defense, its existing unemployment insurance system, reduces the income shock to 5.3 percent. Even so, an additional 8.4 million Brazilians could fall into poverty. The policy responses announced by the government, and particularly the Auxilio Emergencial (AE) transfer, have the potential to fully absorb the labor income shock for the poorest 40 percent and reduce poverty. Yet, these results reflect annualized income, obscuring the sharp reduction in monthly income if demand shocks persist after the AE ends. Looking towards the next phase of the response, considering extensions of AE that are either less generous or more restricted provide a fiscally prudent approach for continuing to support Brazil’s most vulnerable.
format Policy Note
author Cereda, Fabio
Rubiao, Rafael M.
Sousa, Liliana D.
author_facet Cereda, Fabio
Rubiao, Rafael M.
Sousa, Liliana D.
author_sort Cereda, Fabio
title COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis
title_short COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis
title_full COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis
title_fullStr COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis
title_full_unstemmed COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis
title_sort covid-19, labor market shocks, poverty in brazil : a microsimulation analysis
publisher World Bank, Washington, DC
publishDate 2020
url http://documents.worldbank.org/curated/en/883191597258941357/COVID-19-Labor-Market-Shocks-and-Poverty-in-Brazil-A-Microsimulation-Analysis
http://hdl.handle.net/10986/34372
_version_ 1764480762065715200

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