Assessing the effectiveness of social protection measures in mitigating COVID-19-related income shocks in the European union

Katrin Gasior, H. Xavier Jara and Mattia Makovec

Economic Analysis and Policy, 2024, vol. 83, issue C, 583-605

Abstract: By means of counterfactual simulation methods, this paper quantifies the role of tax–benefit policies in mitigating the shock of the COVID-19 pandemic to household income in the European Union. The tax-benefit microsimulation model for the European Union EUROMOD is used to decompose changes in the income distribution into the effects of: (i) earnings losses due to COVID-19, (ii) automatic stabilizers, (iii) monetary compensation schemes introduced during the pandemic; and (iv) COVID-19-specific reforms to taxes and benefits implemented by European Union governments. The results show a great deal of heterogeneity between countries in terms of earnings losses and the effect of tax-benefit policies during the COVID-19 pandemic. In most countries, the largest contribution to cushioning the economic shock of the pandemic comes from monetary compensation schemes. Automatic stabilizers also play a role, mainly through the effects of social insurance contributions, taxes, and unemployment insurance benefits. Tax-benefit systems cushioned incomes to a large extent even among those most severely affected by the shock to earnings, with an important role for monetary compensation schemes, but also a larger stabilizing effect of unemployment insurance. Among automatic stabilizers, social assistance benefits played an important role in cushioning the income shock for the poorest quintiles among the most severely affected, but only in selected countries.

Keywords: Social protection; Social safety nets and transfers; Social welfare; COVID-19; Poverty and fiscal; Financial and economic crisis; EU; Income distribution (search for similar items in EconPapers)
JEL-codes: D31 E24 H24 I38 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Assessing the effectiveness of social protection measures in mitigating COVID-19-related income shocks in the European Union (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:83:y:2024:i:c:p:583-605

DOI: 10.1016/j.eap.2024.07.004

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