The Distributive Impact of the Labour Market and of Cash Transfer Policies during the COVID-19 Pandemic in Latin America

Abstract Latin America was one of the regions hardest hit by the COVID-19 pandemic. This paper aims to assess the evolution of family income inequality and its components from the onset of the pandemic to the end of 2021 in six Latin American countries: Argentina, Brazil, Colombia, Costa Rica, Peru and Uruguay. The unequalising impact of the worsening of the labour market during the contraction period was associated with the significant loss of informal jobs. This effect was partially offset by the equalising role of cash transfer policies. During the recovery period, the distributive impacts of these income sources were the opposite of those observed during the contraction period, as most countries gradually reduced or ceased these transfers while labour incomes partially rebounded. Two years into the COVID-19 pandemic, income inequality in most countries either remained the same or had decreased compared to 2019, even though total family incomes are still below the levels of that year.