DP16366 Inequality in Life and Death

Author(s): Martin Eichenbaum, Sérgio Rebelo, Mathias Trabandt
Publication Date: July 2021
Keyword(s): Epidemic, Inequality, Recession
JEL(s): E1, H0, I1
Programme Areas: Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16366

We argue that the Covid epidemic disproportionately affected the economic well-being and health of poor people. To disentangle the forces that generated this outcome, we construct a model that is consistent with the heterogeneous impact of the Covid recession on low- and high-income people. According to our model, two thirds of the inequality in Covid deaths reflect pre-existing inequality in comorbidity rates and access to quality health care. The remaining third, stems from the fact that low-income people work in occupations where the risk of infection is high. Our model also implies that the rise in income inequality generated by the Covid epidemic reflects the nature of the goods that low-income people produce. Finally, we assess the health-income trade-offs associated with fiscal transfers to the poor and mandatory containment policies.