COVID-19 Impacts on Household Welfare

COVID-19 Impacts on Household Welfare

So far, we have focused on how the pandemic has affected labor market outcomes (notably income and employment) in terms of scale, prevalence, and location, along with how it has affected food insecurity. Now we turn our attention to the heterogeneous impacts of the pandemic on households with different levels of expenditures. We treat each household’s welfare in 2018 as a proxy of its welfare in 2020, that is, before the lockdown. We then analyze the distributional impacts of the pandemic using as a base the expenditure quintiles from the 2018 Socio-Economic and Food Security Survey (SEFSec). More precisely, our analysis uses per capita expenditure as the relevant welfare indicator to construct the quintiles.15

Distributional Impact of COVID-19 on Incomes

Which households, from the poorest to the richest, experienced the biggest impacts in terms of reduced incomes? Our results show that the negative impacts of the pandemic on household incomes have been prevalent among Palestinian households. Overall, income fell in at least 60 percent of the region’s households across all expenditure quintiles, without significant differences across the distribution, and 40 percent reported that their income fell by 50 percent or more across the whole expenditure distribution.

Given the spatial disparities in the living standards between the West Bank and Gaza, the rest of our analysis is based on separate quintiles of per capita expenditure for each location rather than quintiles of per capita expenditure for the full population. For example, when using quintiles for the whole population in the West Bank and Gaza, we find that 44 percent of the households from Gaza belong to the lowest overall expenditure quintile (versus 6 percent in the West Bank), and about 75 percent of the households belong to the two lowest quintiles (versus 21 percent in the West Bank) (see annex figure 3A.1). Similarly, using the full population quintiles, 80 percent of households in the bottom quintile live in Gaza, while in the top quintile almost 95 percent of households are from the West Bank (see figure 3A.2). Keep in mind, though, that one-to-one comparisons between quintiles in the two locations would be misleading, since these quintiles were constructed separately and correspond to different levels of expenditure.

When we break down the results between the West Bank and Gaza we find that households in both locations experienced lower incomes at all expenditure levels (figure 3.10). However, within the West Bank and in Gaza, we find that poorer households were more likely to face a negative income shock. For instance, while more than 76 percent of