COVID-19 induced national lockdown and income inequality: evidence from Pakistan

Abstract

ABSTRACT COVID-19 posits two risks to developing countries. On the one hand, growing COVID-19 cases exposed the vulnerabilities of the already debilitating health sector, while, on the other hand, policies to control the spread of COVID-19 can exasperate economic disparities. In this article, we examine one such policy response to control the spread of COVID-19 by the Government of Pakistan, the National Lockdown. This study assesses a plausible impact of this policy response on income equality across Pakistan. By exploiting a nationally representative household survey, it is observed that COVID-19 induced national lockdown is associated with increased income inequality in Pakistan. Our estimates show that about a 16 percent increase in income differences between the top 10 and the bottom 10 percent of the population could be associated with national lockdowns. Gini Coefficient also indicates an up to 3 percent increase in inequality after lockdown. At the disaggregated level, the suggestive evidence shows that inequality has increased within the urban population. Interestingly, the lockdown has also increased the inequality within occupations that can be managed remotely from home.