Understanding the Effects of Coronavirus on Australian Households: A Macro-Micro Analysis

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Mariano, Marc Jim
Verikios, George
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2022
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Abstract

The coronavirus (COVID-19) pandemic brought economic recession that affected nations, businesses, and households globally. The severity of this global economic crisis is large and the impact has been asymmetric across socioeconomic groups. We examine the distributional effects of the COVID-19 pandemic across household types using a specially-designed model that combines macro (computable general equilibrium) and micro (heterogenous households) approaches. Computable general equilibrium models are able to capture behavioural changes in macroeconomic and sectoral variables but they often lack the rich distributional detail found in microsimulation models. In this paper, we address this limitation by incorporating 10,046 actual households into a computable general equilibrium model to capture the heterogeneity through which the pandemic may influence household behaviour. We find that the income effects are asymmetric across income groups leading to a slight increase in income inequality. The distributional effects are more progressive for non-wage income sources and uniform for wage income. For younger cohorts, income changes are dominated by employment effects whereas income changes for older cohorts are dominated by changes in capital rentals and government transfers. Spatially, the income effects follow a similar pattern for city and non-city dwellers.

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Economic Papers

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41

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3

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© 2022 The Economic Society of Australia.

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This is the peer reviewed version of the following article: Mariano, M.J. and Verikios, G. (2022), Understanding the Effects of Coronavirus on Australian Households: A Macro–Micro Analysis. Economic Papers, 41: 215-231. https://doi.org/10.1111/1759-3441.12361, which has been published in final form at https://onlinelibrary.wiley.com/doi/10.1111/1759-3441.12361. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.

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Sociology of health

Public health

Banking, finance and investment

Applied economics

Social Sciences

Economics

Business & Economics

COVID-19

computable general equilibrium

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Mariano, MJ; Verikios, G, Understanding the Effects of Coronavirus on Australian Households: A Macro-Micro Analysis, Economic Papers, 2022, 41 (3), pp. 215-231

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