Pandemic Containment and Inequality in a Developing Economy

We held the 9th Consumer Pyramids Research Seminar on April 29 2021 at 7.30 PM IST (3 PM GMT / 10 AM ET / 7 AM PT). Over 120 people from across the world registered to attend the event.

Prof. Srinivasan Murali and Prof. Kunal Dasgupta from IIM Bangalore presented

Pandemic Containment and Inequality in a Developing Economy

Their paper was discussed by Prof. Shankha Chakraborty from the University of Oregon.

You can view a recording of the webinar here.

Summary

The presentation was a great example of simple and elegant model-based empirical macroeconomic and epidemeological work. It demonstrated the inequitous economic and health impacts that lockdowns might have on high and low skilled workers, as well as proposed the magnitude of transfers from a central planner that might induce better outcomes. The discussion was succint and made many useful suggestions to the authors on how to connect to the literature, motivate some of their theoretical assumptions and elaborate their framework.

Abstract

Using high frequency individual-level panel data from India, we show that income inequality, measured as the ratio of high-skilled to low-skilled income, increased sharply following the imposition of lockdown triggered by COVID-19. To explain this fact, we integrate a canonical SIR epidemiological model into a general equilibrium framework with high-skilled and low-skilled workers, each choosing to work either from their work locations (onsite) or from their homes (remote).

On-site and remote labour are imperfect substitutes, but more substitutable for high-skilled relative to low-skilled workers. Upon introducing pandemic containment policies such as lockdowns that restrict labour mobility, the model can explain around 60 percent of the observed increase in inequality.

We also show that the containment policies are less effective in controlling disease spread among low-skilled workers as they optimally choose to work more onsite compared to their high-skilled counterparts. Introducing direct transfers for low-skilled workers reverses this increase in inequality and reduces the disparity in health outcomes between high-skilled and low-skilled workers.

CPHS Applications

Murali and Srinivasan use data from CPHS to measure income and to classify workers based on their levels of skill in their model based on their educational attainment. They also exploit the panel-nature of CPHS to create measures of aggregate income that are corrected for changes in the sample across time. This is an interesting and novel application of CPHS in macroeconomic and epidemeological work. It throws up many attractive possiblities for future model-based work using the 600 plus high-frequency indicators that are available.

The data from CPHS is rich and can help in calibrating as well as enriching macroeconomic models. In fact, CPHS can be used to classify workers on skill based on its multiple occupation groups, employment arrangement, industry of occupation etc. Additionally, CPHS collects rich information on all-India income (Sl. No. 110-130), consumption (Sl. No. 131 - 350) and borrowing (Sl. No. 454-621), which are frequently used in macroeconomic models. Finally, dynamic models that depend on household sentiments can also be calibrated using CPHS’s rich coverage of forward-looking household sentiment (Sl. No. 622 - 626).

Even epidemeological modeling can benefit from CPHS’ rich data collection. Mobility information is present both from our data on migration as well as our data on time use (Sl. No. 88 - 98), including time spent traveling. CPHS additionally captures indicators relating to self-assessed health, hospitalisation status, medical expenditures (Sl. No. 318 - 326), as well as imputed information on vital statistics such as births and deaths coming from the household member roster.

About the CPHS Research Seminar Series

The CPHS Research Seminar Series features work based on the Consumer Pyramids Household Survey. It is a platform for researchers to receive critical and technical feedback from accomplished peers. It is also meant to engage with the larger research community who may gain from technical discussions. You can find all previously presented work on the Events Section of our website. You can also view a recording of every seminar so far at the CPHS Research Seminar Playlist on our YouTube channel.

The Consumer Pyramids Household Survey is India’s largest regular household survey and the world’s largest household panel survey. CPHS has collected data on over 232,000 households and 1.19 million individuals surveyed since 2014. The survey collects information on household demographics, individual identities, employment, health status, financial inclusion, individual and household incomes, consumption expenditures, ownership of assets and intentions to buy them, household amenities and consumer sentiments. Income and expenses data are a monthly time-series since January 2014.

Record-level data from all 21 Waves of CPHS is available through a subscription service. Data from the Sep-Dec 2020 Wave of CPHS was released to subscribers on January 2, 2021. Please visit our website to learn more about CPHS and how to gain access to the record-level data.

If you have written a paper using CPHS and would like to present in the Seminar Series, please write to Kaushik Krishnan at kkrishnan@cmie.com.

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