Real-Time Inequality and the Welfare State in Motion: Evidence from Covid-19 in Spain

47 Pages Posted: 18 Aug 2020 Last revised: 4 Feb 2022

See all articles by Oriol Aspachs

Oriol Aspachs

affiliation not provided to SSRN

Ruben Durante

National University Singapore; Barcelona School of Economics; IZA; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Alberto Graziano

affiliation not provided to SSRN

JOSEP MESTRES

affiliation not provided to SSRN

Jose G. Montalvo

Universitat Pompeu Fabra

Marta Reynal-Querol

Universitat Pompeu Fabra

Date Written: July 2020

Abstract

Official statistics on economic inequality are only available at low frequency and with considerable delay. This makes it challenging to assess the impact on inequality of fast-unfolding crises like the COVID-19 pandemic, and to rapidly evaluate and tailor policy responses. We propose a new methodology to track income inequality at high frequency using anonymized data from bank records for over three million account holders in Spain. Using this approach, we analyze how inequality evolved between February and November 2020 (compared to the same months of 2019). We first show that the wage distribution in our data matches very closely that from official labor surveys. We then document that, in the absence of government intervention, inequality would have increased dramatically, mainly due to job losses and wage cuts experienced by low-wage workers. The increase in pre-transfer inequality was especially pronounced among the young and the foreign-born, and in regions more dependent on services. Public transfers and unemployment insurance schemes were effective at providing a safety net to the most affected segments of the population and at offsetting most of the increase in inequality. Increased inequality is primarily driven by differential changes in employment rate. Indeed, using individual-level regressions, we find that, over the course of the pandemic, the probability of being employed decreased drastically for workers in the lower part of the pre-COVID wage distribution, young cohorts, and foreign-born.

Keywords: Administrative data, COVID-19, High Frequency Data, Inequality

JEL Classification: C81, D63, E24, J31

Suggested Citation

Aspachs, Oriol and Durante, Ruben and Graziano, Alberto and MESTRES, JOSEP and Montalvo, Jose G. and Reynal-Querol, Marta, Real-Time Inequality and the Welfare State in Motion: Evidence from Covid-19 in Spain (July 2020). CEPR Discussion Paper No. DP15118, Available at SSRN: https://ssrn.com/abstract=3674894

Oriol Aspachs (Contact Author)

affiliation not provided to SSRN

No Address Available

Ruben Durante

National University Singapore ( email )

HOME PAGE: http://www.rubendurante.net

Barcelona School of Economics ( email )

Carrer de Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

IZA ( email )

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Alberto Graziano

affiliation not provided to SSRN

JOSEP MESTRES

affiliation not provided to SSRN

Jose G. Montalvo

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
08005 Barcelona
Spain

Marta Reynal-Querol

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas, 25-27
Barcelona, E-08005
Spain

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