An empirical analysis of the early impact of Covid-19 on income-related inequality in household stress

Summary

This paper focuses on the early impact of Covid-19 on income-related inequality in the UK. Using a Concentration Index, we investigate whether Covid-19 has differing effects on the stress levels of low-income households versus high-income level households. We use two measures of stress, mental stress and financial stress and a Recentered Influence Function regression approach to study how the policies implemented by the UK government during the pandemic affected inequality. On examining UK’s policy response, our results show that the mortgage holiday was very effective in lowering income-related inequality in financial stress and the Coronavirus Job Retention Scheme was effective in containing the rise in income-related inequality in mental stress.