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26 January 2021

COVID-19 and global income inequality

There is a widespread belief that the COVID-19 pandemic has increased global income inequality, reducing per capita incomes by more in poor countries than in rich. This supposition is reasonable but false. Rich countries have experienced more deaths per head than have poor countries; their better health systems, higher incomes, more capable governments and better preparedness notwithstanding.

The US did worse than some rich countries, but better than several others. Countries with more deaths saw larger declines in income. There was thus not only no trade-off between lives and income; fewer deaths meant more income. As a result, per capita incomes fell by more in higher-income countries.

Country by country, international income inequality decreased. When
countries are weighted by population, international income inequality
increased, not because the poorest countries diverged from the richest
countries, but because China – no longer a poor country – had few deaths
and positive economic growth, pulling it away from poor countries. That
these findings are a result of the pandemic is supported by comparing
global inequality using IMF forecasts in October 2019 and October 2020.

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