Mitigating Poverty: Global Estimates of the Impact of Income Support during the Pandemic

This paper reconstructs the full welfare distributions from household surveys of 160 countries, covering 96.5 percent of the global population, to estimate the pandemic-induced increases in global poverty and provide information on the potential short-term effects of income-support programmes on mitigating such increases. Crucially, the analysis performs a large-scale simulation by combining the welfare distributions with the database of social protection measures of Gentilini et al. (2021) and estimates such effects from 72 actual income-support programmes planned or implemented across 41 countries. The paper reports three findings: First, the projection of additional extreme poverty, in the absence of income support, ranges between 117 million people under a distributive-neutral projection and 168 million people under a distributive-regressive projection —which may better reflect how the shock impacted poor and vulnerable households. Second, a simulation of the hypothetical effects of a temporary basic income with an investment of 0.5 percent of developing countries’ GDP, spread over six months, finds that this amount would mitigate to a large extent, at least temporarily, the increase in global poverty at both the $1.90- and $3.20-a-day thresholds, although poverty would still increase significantly in the poorest regions of the world. Third, the analysis of income-support programmes in 41 countries suggests that they may have mitigated, at least temporarily, the overall increase in poverty in upper-middle income countries but may have been insufficient to mitigate the increase in poverty at any poverty line in low-income countries. Income support likely mitigated 60 percent of the increase in poverty at the $3.20-a-day threshold and 20 percent at the $5.50-a-day threshold among lower-middle-income countries. This pattern is correlated with the amount of social assistance per capita payments made in each country.