Poverty during Covid-19 in North Macedonia: Analysis of the distributional impact of the crisis and government response

TL;DR

This study uses microsimulation to assess COVID-19's impact on poverty in North Macedonia and evaluates the effectiveness of government measures in mitigating income loss and poverty increase.

Contribution

It provides a novel microsimulation analysis of COVID-19's distributional impact and evaluates specific government interventions in North Macedonia.

Findings

Without intervention, 120,000 more people would have fallen into poverty.

Government measures recovered over half of the income loss caused by COVID-19.

Certain policies were progressive and targeted vulnerable groups effectively.

Abstract

In this paper we simulate the poverty effect of the Covid-19 pandemic in North Macedonia and we analyze the income-saving power of three key government measures: the employment-retention scheme, the relaxed Guaranteed Minimum Income support, and one-off cash allowances. In this attempt, the counterfactual scenarios are simulated by using MK-MOD, the Macedonian Tax and Benefit Microsimulation Model, incorporating actual data on the shock-s magnitude from the second quarter of 2020. The results suggest that without the government interventions, of the country-s two million citizens, an additional 120,000 people would have been pushed into poverty by COVID-19, where 340,000 were already poor before the pandemic. Of the 120,000 newly poor about 16,000 would have been pushed into destitute poverty. The government-s automatic stabilizers worked to shield the poorest people, though these were clearly pro-feminine. In all, the analyzed government measures recovered more than half of the income loss, which curbed the poverty-increasing effect and pulled an additional 34,000 people out of extreme poverty. The employment-retention measure was regressive and pro-masculine; the Guaranteed Minimum Income relaxation (including automatic stabilizers) was progressive and pro-feminine; and the one-off support has been pro-youth.