Social protection and COVID-19: Evaluation of regional impacts of the Emergency Aid policy in Brazil

Abstract

The new Coronavirus pandemic (COVID-19), which began in late 2019 in China, lead to a health and economic crisis of significant proportions. The decrease in economic activity in order to prevent further spread of the disease affected all economic sectors, resulting in the unprecedented loss of jobs and the weakening of the informal economy. The Emergency Aid (EA) was created with the purpose of guaranteeing a subsistence income, minimizing the economic problems brought about by the pandemic. The aim of this paper is to analyze the direct and indirect impacts of the EA income transfers on the economy of Brazilian states. Of particular interest is to assess the distribution of indirect impacts as there may be spillovers of income between regions because of inter-sector relations and production chains. Thus, given the differences in production structures, the accounting of indirect impacts can result in a structure of regional distribution of benefits that is quite different from the initial one. The aim of this study is to assess which regions are relatively more benefited by comparing the initial structure of the distribution of the EA benefits with the final structure, after accounting for the spillovers. To do so, an interregional input-output model developed by Haddad et al. (2018) and data from the Brazilian Transparency Portal (Portal da Transparência) on resources allocated by the EA in the period from April to August 2020 were used. The results show that the states that benefited most in the initial distribution of the EA are the relatively most populous and poorest (Northeast) and the most benefited in the final distribution are those with more complex and relatively more developed productive structures (Southeast and South).