The role of short-time work and discretionary policy measures in mitigating the effects of the COVID-19 crisis in Germany.

In this paper, we investigate the impact of the COVID-19 pandemic on German household income in 2020 using a micro-level approach. We combine a microsimulation model with novel labour market transition techniques to simulate the COVID-19 shock on the German labour market. We find the consequences of the labour market shock to be highly regressive with a strong impact on the poorest households. However, this effect is nearly entirely offset by automatic stabilisers and discretionary policy measures. We explore the cushioning effect of these policies in detail, showing that short-time working schemes and especially the one-off payments for children are effective in cushioning the income loss of the poor.

COVID-19 and (gender) inequality in income: the impact of discretionary policy measures in Austria.

This paper analyzes the impact of the COVID-19 crisis on household income in Austria, using detailed administrative labor market data, in combination with micro-simulation techniques that enable specific labor market transitions to be modeled. We find that discretionary fiscal policy measures in Austria are key to counteracting the inequality- and poverty-enhancing effect of COVID-19. Additionally, we find that females tend to experience a greater loss in terms of market income. The Austrian tax-benefit system, however, reduces this gender differences. Disposable income has dropped by around 1% for both males and females. By comparison, males profit mainly from short-time work scheme, while females profit especially from other discretionary policy measures, such as the one-off payment for children.

The impact of COVID-19 on households´ income in the EU.

This analysis makes use of economic forecasts for 2020 issued by the European Commission in Autumn 2019 and Spring 2020, and of a counterfactual under a no-policy change assumption, to analyse the impact of the COVID-19 crisis on EU households´ income. Additionally, our analysis assesses the cushioning effect of discretionary fiscal policy measures taken by the EU Member States. We find that the COVID-19 pandemic is likely to affect significantly households' disposable income in the EU, with lower income households being more severely hit. However, our results show that due to policy intervention, the impact of the crisis is expected to be similar to the one experienced during the 2008-2009 financial crisis. In detail, our results indicate that discretionary fiscal policy measures will play a significant cushioning role, reducing the size of the income loss (from -9.3% to -4.3% for the average equivalised disposable income), its regressivity and mitigating the poverty impact of the pandemic. We conclude that policy interventions are therefore instrumental in cushioning against the impact of the crisis on inequality and poverty. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s10888-021-09485-8.