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COVID-19, Labor Market Shocks, Poverty in Brazil : A Microsimulation Analysis / Fabio Cereda.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Cereda, Fabio.
- Series:
- Policy Notes.
- World Bank e-Library.
- Policy Notes
- Language:
- English
- Subjects (All):
- Business Cycles and Stabilization Policies.
- Coronavirus.
- COVID-19.
- Employment and Unemployment.
- Income Distribution.
- Inequality.
- Informal Sector.
- Labor Market.
- Labor Markets.
- Macroeconomics and Economic Growth.
- Poverty.
- Social Protections and Assistance.
- Social Protections and Labor.
- Unemployment.
- Local Subjects:
- Business Cycles and Stabilization Policies.
- Coronavirus.
- COVID-19.
- Employment and Unemployment.
- Income Distribution.
- Inequality.
- Informal Sector.
- Labor Market.
- Labor Markets.
- Macroeconomics and Economic Growth.
- Poverty.
- Social Protections and Assistance.
- Social Protections and Labor.
- Unemployment.
- Other Title:
- COVID-19, Labor Market Shocks, Poverty in Brazil
- Place of Publication:
- Washington, D.C. : The World Bank, 2020.
- System Details:
- data file
- Summary:
- 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.
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