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Can COVID-19 Shows Income Inequality?

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DOI: 10.13140/RG.2.2.26393.03686/6

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 CAN COVID-19 SHOWS INCOME INEQUALITY?

Mario Arturo Ruiz Estrada

SWRC-FEA-UM
University of Malaya, 50603 Kuala Lumpur, Malaysia
Email: marioruiz@um.edu.my

Keywords: Policy Modeling; Income Inequality Indicators; Economic Development;

Graphs.
JEL: I32

Abstract
This paper attempts to investigate the existence of a correlation between COVID-19 and
income inequality. This research paper's primary objective is to prove that the fast expansion
of COVID-19 cases can be related to the income inequality levels in any country. However,
this paper is not looking at economic growth. We focus on how people benefit from this
economic growth through the income (re)distribution among different social groups in the
same country. According to World Health Organization (WHO), the top countries with more
COVID-19 infected cases, such as the U.S., Brazil, Russia, India, United Kingdom, Peru,
Chile, Spain, Italy, and Iran. According to our preliminary results from the ten countries in
mention, we can observe the sad reality of income inequality worldwide. Therefore, the
COVID-19 can be an alternative parameter to evaluate the income inequality. Finally, this
paper tries to present policies and recommendations to solve income inequality from a
holistic approach.

1. Introduction
The recent global pandemic crisis (COVID-19) can show how unfair is the world
income distribution. According to this research paper, we assume that COVID-19 can show
how badly is the income distribution globally. We use as a reference point the number of
infected cases from COVID-19, according to the list of World Health Organization (WHO).
Our preliminary results can show the top ten countries with a large number of infected cases
follow by the next order: U.S., Brazil, Russia, India, United Kingdom, Peru, Chile, Spain,
Italy, and Iran. This research wants to prove that it is possible to see the income disparity of
any country in a global pandemic crisis, such as the case of a worldwide pandemic (COVID-
19). The COVID-19 can teach a great lesson to us; this global pandemic can expose the
weaknesses and strengths of any economy. This research's main objective is to focus our
attention on income inequality rather than economic growth (output). We believe that the

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final aim of the country's welfare depends on the redistribution of economic growth among
its different social groups in any country. Moreover, this paper has the intention to introduce
a new indicator for monitoring income inequality from a multidimensional perspective. The
new index is called “Pandemiconomics-Index.” The Pandemiconomics-Index applies the
uses of the octahedron geometrical representation that is continually moving in real-time
according to a constant input of data and running of a serial of growth rates. The
Pandemiconomics-Index can clearly show the evolution of income distribution of any
country from a multidimensional perspective.

The difference between the Pandemiconomics-Index and other indicators, such as the
Gini Coefficient and Lorenz curve, to analyze the income inequality behavior works from
the classic two-dimensional view. In the case of Pandemiconomics-Index graphical
representation is represented by an octahedron. The main idea to apply an octahedron is to
understand four different negative dynamic factors that can directly affect the income
inequality behavior anytime and anywhere. Which includes the inflation growth rate (X1),
the unemployment growth rate (X2), the government budget deficit growth rate (X3), and the
economic desgrowth growth rate (X4). At the same time, we have two dependent variables:
the income inequality growth rate (Y1) and the COVID-19 infected cases growth rate (Y2)
simultaneously. The objective of the Pandemiconomics-Index is to offer to policy-makers
and researchers a new index and multidimensional graphical tool for studying the results
achieved with any country into its income inequality behavior consistently.

2. An Introduction to Pandemiconomics-Index
The Pandemiconomics-Index is a measuring model for studying different negative
factors that affect income inequality. The uses of the Pandemiconomics-Index are a flexible
and straightforward analytical tool. It applies different dynamic imbalance states of
disequilibrium’s simultaneously to show the past and present situations of income inequality
behavior in any country based on a single geometrical representation is changing in real-
time. Its field application is not constrained by the country development stage, such as
developed countries, developing country and less developed countries (LDC’s). The use of
the Pandemiconomics-Index considered the characteristics, conditions, and historical
moments of any country development stage. The Pandemiconomics-Index is like a graphical
simulator in real-time that show different scenarios in the income inequality behavior of any
country. This Pandemiconomics-Index does not attempt in any case to be a forecasting
model. It focuses on the past and present situation of any country into its income inequality
behavior.

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 The Pandemiconomics-Index is a measuring model for studying different negative
factors that affect income inequality. The proposed Pandemiconomics-Index is a flexible and
straightforward geometrical representation. It applies different dynamic imbalance states of
disequilibrium’s simultaneously to show the past and present situations of income inequality
behavior in any country based on a single geometrical representation is changing in real-
time.

3. The Pandemiconomics-Index Assumptions

This part of the research presents the Pandemiconomics-Index uses the assumptions.
The Pandemiconomics-Index consists in the constant interaction of four independent
variables in constant changes: the inflation growth rate (X1), the unemployment growth rate
(X2), the government budget deficit growth rate (X3); the economic desgrowth growth rate
(X4). Two dependent variables follow by the income inequality growth rate (Y1) and the
COVID-19 infected cases growth rate (Y2) in real-time simultaneously. The
Pandemiconomics-Index assumes that each country has its own microeconomic and
macroeconomic problems and income inequality behavior. The Pandemiconomics-Index
follows three underlying assumptions are:
1.- The income inequality in any country cannot be changed without political and social
changes; it can only be under a durable socio-economic-political national fabric from
different social groups such as the private sector, government, and civil society.
2.- The income inequality of any country is spurred by the poor redistribution structure (Tax).
3.- The income (re)distribution in different countries has its unique characteristics.

Therefore, it might be challenging to try to implement a successful income

(re)distribution programs from another successful income (re)distribution programs, because
of cultural, socio-economic structure, history, education level, religion, race, private sector
thinking, political system, production structure, people mentality and habits, consumption
preferences, and productivity.

The Pandemiconomics-Index offers a new perspective on income inequality analysis.

The traditional research under the Gini coefficient and Lorenz curve to analyze income
inequality that only evaluates the effects superficially but never the causes of income
inequality deeply. Still, with the Pandemiconomics-Index, it is possible to analyze different
negative factors that can affect income inequality from a general perspective in the same
graphical space and time.

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4. Phases in the Construction of the Pandemiconomics-Index
The phases in the construction of the Pandeminomics-Index follow the next order:
Phase I: Design of the Data-Input-Table
The data-input-table is a database that keeps six columns that permits the storage of a large
amount of data annually to quantified six different growth rates between two periods (years)
independently (four independent variables. These four negative factors are:
1. The inflation growth rate (X1)
2. The unemployment growth rate (X2)
3. The government budget deficit growth rate (X3)
4. The economic desgrowth growth rate (X4)
And two dependent variables, such as (i) the income inequality growth rate (Y1) and (ii) the
COVID-19 infected cases growth rate (Y2). These six growth rates can show globally how
income inequality behaves in any country from a multidimensional perspective.

Phase II: the measurement of each negative factors that can generate income inequality
(Xi) and the final impact of the negative factors that can generate Income Inequality and
COVID-19 infected cases (Yj)

The second phase of the calculation of the Pandemiconomics-Index involves the

measurement of six growth rates using the variables in six basic data-input-table. The
inflation growth rate (X1), the unemployment growth rate (X2), the government budget
deficit growth rate (X3), and the economic desgrowth growth rate (X4). Additionally, two
dependent variables follow by the income inequality growth rate (Y1) and the COVID-19
infected cases growth rate (Y2). These six variables are analyzed with their changes amount
between the previous year (n) and the given year (t-1) under the calculation of six growth
rates, respectively. The count of each growth rate number of variables used in the
Pandemiconomics-Index varies, depending on the objectives of the researchers or policy-
makers and the orientation of the cases of research.

Once the number of variables is determined, the next step is to collect the statistical
and historical data that constitute the four independent variables and two dependent
variables. All variables in data-input-table may not have a direct relationship between them
-- they may be independent variables or endogenous variables and two dependent variables
or endogenous variables. Each of the four Xi variables to be measured is an independent
variable (i.e., endogenous variable). However, there is no connection and interdependency
among these four Xi indices when joined in the graph. These four Xi variables are using to
draw a figure that represents the evolution and stages of income inequality in any country
from a multidimensional perspective.
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These four Xi variables can generate income inequality is followed by:
1. the inflation growth rate (X1) (see Expression 1);
2. the unemployment growth rate (X2) (see Expression 2);
3. the government budget deficit growth rate (X3) (see Expression 3);
4. the economic desgrowth growth rate (X4) (see Expression 4).
The first step is to define all variables and parameters together. Once we establish the
variables and parameters, we can build and input our information in the data-input-table
column. Finally, we can proceed to calculate our six growth rates, followed by:

Growth Rate-1: The Calculation of the inflation growth rate (X1) is the difference
between the Consumer Price Index –CPI- of a given year (CPI)n+1 and the CPI of the previous
year (CPI)n divided by the CPI of the last year (CPI)n.

X1 = (CPI)n+1 - (CPI)n/(CPI)n (1)

Growth Rate-2: The Calculation of the unemployment growth rate (X2) is the
difference between the unemployment volume of a given year (U)n+1 and the unemployment
volume of the previous year (U)n divided by the unemployment volume of the previous year
(U)n.

X2 = (U)n+1 - (U)n/(U)n (2)

Growth Rate-3: The Calculation of the government budget deficit growth rate (X3)
is the difference between the government budget deficit amounts in US$ Millions of a given
year (D)n+1 and the government budget deficit amounts in US$ Millions of the previous year
(D)n divided by the government budget deficit amounts in US$ Millions of the previous year
(D)n.

X3 = (D)n+1 - (D)n/(D)n (3)

Growth Rate-4: The Calculation of the economic desgrowth growth rate (X4) is the
difference between the economic desgrowth amount of a given year (δ)n+1 and the economic
desgrowth amount of the previous year (δ)n divided by the economic desgrowth amount the
previous year (δ)n.
X4 = (δ)n+1 - (δ)n/(δ)n (4)

Moreover, we have two final impacts from the four negative factors that directly
affect two Yj variables: the income inequality growth rate (Y1) and the COVID-19 infected
cases growth rate (Y2).

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 Growth Rate-5: The Calculation of the income inequality growth rate (Y1) is the
difference between the total income inequality of a given year (Y)n+1 and the total income
inequality of the previous year (Y)n divided by the whole poor people amount of the last
year (Y)n. (Equation 5)

Y1 = (Y)n+1 - (Y)n/(Y)n (5)

Growth Rate-6: The Calculation of the COVID-19 infected cases growth rate (Y2)
is the difference between the total income-per-capita amount of a given year (C)n+1 and the
total income-per-capita amount of the last year (C)n divided by the total income-per-capita
amount of previous year (C)n. (Equation 6)

Y2 = (C)n+1 - (C)n/(C)n (6)

5. Plotting of the Pandemiconomics-Index

The Pandemiconomics-Index presents a general idea about the current income
inequality situation in any country and anytime based on a new graphic representation (see
Figure 1). This new visual description concept consists of six axes (Ruiz Estrada, 2017), each
of which has a positive value. In the case of this research, the value in four of the axes is
represented by the negative factors that can generate income inequality (the inflation growth
rate (X1), the unemployment growth rate (X2), the government budget deficit growth rate
(X3) and the economic desgrowth growth rate (X4)). These Xi variables are independent
variables (see Figure 1). They can join together to create a general area. This general area is
called “the area of coverage of the negative factors that can generate income distribution
(Xi).” The (Xi) shows the dimension of negative factors that can affect the income
distribution expansion from a multidimensional perspective. For comparison purposes, the
area of coverage of the negative factors that can generate a better income distribution (Xi)
can apply to different years for any country. The area of coverage of the negative factors that
can create better income distribution (Xi) under the comparison of two periods. In the case
of this research paper, two periods (i.e., the given period (n+1) and the previous period (n)).
The area of coverage of the negative factors can generate a proper income distribution (Xi)
may present three possible scenarios, namely:

(a) Expansion Xi’ first period < Xi’’ second period)

(b) Stagnation Xi’ first period = Xi’’ second period)
(c) Contraction Xi’ first period > Xi’’ second period).

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 The fifth and sixth axes are represented by the income inequality growth rate (Y1)
and the COVID-19 infected cases growth rate (Y2). They are positioned in the center of the
graph, the meeting point of the other four axes.

Fig. 1: The Pandemiconomics-Index Graph

Y1

X3
X2

X4 X1

Y2
Source: Author

6. Difference between The Pandemiconomics-Index and Lorenz Curve (Gini

Coefficient)

All the above-mentioned analytical methodologies persist in measuring welfare

based on the evaluation of underlying variables in the study of income inequality. On the
other hand, this research paper asserts that the study of income inequality should not merely
focus on the traditional scheme of indicators. We should consider a new alternative analytical
toolbox based on a unique series of indicators and graphs to do an in-depth analysis of
countries from a multidimensional perspective. The Lorenz curve contribution and the Gini
coefficient in the past fifty years play an essential role in the study of income inequality in
many countries. In fact, “the Lorenz curve and Gini Coefficient (Gini coefficient, was first
launched in 1912 with the single goal of putting people back at the center of the income
distribution in terms of a statistical debate and policy. The Gini coefficient focuses on the
7
frequency distribution of the income, a topical theme in the current analysis of the income
inequality debate, providing path-breaking analysis and policy recommendations (Gini,
1912).

The weak points can find in the Lorenz Curve and the Gini coefficient. The Lorenz
Curve and Gini coefficient are supported only by the relative mean absolute difference but
also the average absolute difference. The Lorenz curve and Gini coefficient can give only
some remarks in the study of the complicated puzzle of the income inequality study. In the
case of the Pandemiconomics-Index, this model offers an in-depth analysis based on six
variables interacting together in the same graphical space and time (four independent
variables and two dependent variables). The four dependent variables are the inflation growth
rate (X1), the unemployment growth rate (X2), the government budget deficit growth rate
(X3), and the economic desgrowth growth rate (X4). Additionally, two dependent variables
follow by the income inequality growth rate (Y1) and the COVID-19 infected cases growth
rate (Y2) simultaneously. Clearly, the Pandemiconomics-Index can show more coverage of
analysis in the study of the debt that any analytical model related to the study of income
inequality specifically.

The Lorenz curve and Gini coefficient can help to observe the income distribution
superficially the past and present situation of the income inequality of any country. However,
the Lorenz curve and Gini coefficient are focused its attention on the specific point of the
income distribution (effects) from a two-dimensional point of view. The Pandemiconomics-
Index will consider different negative factors (causes) that affect income inequality in its
analysis. Furthermore, the study of the Lorenz curve and the Gini coefficient merely applies
necessary calculations to observe the gains and losses associated with the obstacles in the
income inequality of any country. In a nutshell, this research paper maintains that the Lorenz
curve and Gini coefficient pose many limitations in studying other factors that can affect
the income inequality evaluation in different countries. On this account, this paper further
maintains that the study of income inequality requires simultaneous inclusion of a large
number of variables and a multidimensional graphical approach, respectively.

7. Application of the Pandemiconomics-Index: Worldwide

In our research, compare two indicators to evaluate income inequality, such as the
Lorenz curve (Gini coefficient) (see Figure 2) and the Pandemiconomics-Index (see Figure
3). The reason to select the Lorenz curve (Gini coefficient) in our analysis is that this research
will compare the results and effectiveness of the Pandemiconomics-Index. In both models
were selected ten countries to be compared results (e.g., the U.S., Brazil, Russia, India,
United Kingdom, Peru, Chile, Spain, Italy, and Iran).
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 For the research in this paper, the Pandemiconomics-Index applies from 2019 to 2020
(see Figure 3). We evaluate how the massive expansion of COVID-19 infected cases is
directly related to income inequality. At the same time, the calculation of the four negative
factors can generate income inequality follow by the inflation growth rate (X1), the
unemployment growth rate (X2), the government budget deficit growth rate (X3), and the
economic desgrowth growth rate (X4). At the same time, the income inequality growth rate
(Y1) and the COVID-19 infected cases growth rate (Y2). In the case to apply the
Pandemiconomics-Index on ten countries, we assume that all variables in the
Pandemiconomics-Index use the Omnia Mobilis assumption (Ruiz Estrada, 2011) and the
Dynamic Imbalance State assumption (Ruiz Estrada and Yap, 2013), perhaps both
assumptions can generate an effect of the relaxation of all variables, but both assumptions
have something in common, they examine poverty from a multidimensional perspective.

The relationship between (X1, X2, X3, X4) and (Y1, Y2) among ten countries were
classified into high, middle, and low-income countries. They show that in the majority of
high-income countries, there was a strong relationship between (X1, X2, X3, X4) and (Y1 and
Y2), respectively. We also can observe that any small change of (X1 or X2 or X3 or X4) can
affect dramatically (Y1, Y2) simultaneously. Even countries such as Chile, whose levels of
(X1 = 0.23, X2 = 0.17, X3 = 0.61, X4 = 0.65) can show a faster expansion on the income
inequality constantly in the period 2019-2020, at the same time, (Y1 = 0.51, Y2 = 0.75) are
moving in almost the same proportion were high, it did show a stronger relationship with
(Y1, Y2) expansion. We can confirm that the dramatic changes of (X1, X2, X3, X4) in the
Period (2019-2020) had a huge impact on the fast expansion of (Y1, Y2) in the short run.
Hence. We can observe that the recent social conflicts (demonstrations and massive acts of
violence) in Chile in the year 2019, this is a result of the levels of tolerance of (X1, X2, X3,
X4) overpass its limits until hit strongly on the fast uncontrolled expansion of (Y 1, Y2)
dramatically (see Figure 3).

It can be observed that the U.S. had a higher (Y1 = 0.51, Y2 = 0.85) between (2019-
2020). The reason for this higher value in the (Y1, Y2) of U.S., it is the possibility of different
large proportions of (X1 = 0.17, X2 = 0.15, X3 = 0.65, X4 = 0.45), in the case of countries
with higher size of (Y1, Y2). However, during the (2019-2020), the U.S. saw a large
expansion of (Y1, Y2). This originates from the alarming constant income inequality that
directly affects the faster expansion of the COVID-19 infected cases daily (see Figure 3).

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 In terms of (X1, X2, X3, X4) for Europe, such as the United Kingdom, Spain, Italy.
These three countries were higher from 2019 to 2020. Such a high average level of (X1 =
0.23, X2 = 0.18, X3 = 0.81, X4 = 0.89) can be attributed to the Trump policy to Europe with
a high level of trade protectionism in the form of tariff and non-tariff barriers that the U.S.
government imposed on E.U. The main reason the U.S. imposes tariffs were originated from
the high subsidies on specific sectors such as agriculture and services sectors from many
European members (see Figure 3).

The Application of the Pandemiconomics-Index to Brazil, Russia, and India shows

that constant expansion of income inequality recently, especially in big cities, but in the rural
area continues higher. Brazil, Russia, and India had high average levels of (X1 = 0.35, X2 =
0.45, X3 = 0.72, X4 = 0.78). Therefore, the (Y1 = 0.85, Y2 = 0.81) maintains a higher level of
expansion, but we can observe a constant expansion in the (X1, X2, X3, X4) until our days
(see Figure 3).

In upper middle income (Iran) in the Period (2019 and 2020), the (X1 = 0.35, X2 =
0.45, X3 = 0.86, X4 = 0.89) was under a high level of expansion. On the other hand, we can
observe a constant expansion of (X1, X2, X3, X4), while both (Y1 = 0.73, Y2 = 0.81) appeared
to be in a constant expansion too. The high level of (Y1, Y2) in upper-middle-income
countries was due to a constant wearing until we can observe an uncontrolled situation for
upper-middle-income countries subsequently (see Figure 3).

Finally, this is possible to observe that any large or small changes on (X1 or X2 or X3 or
X4) can directly affect (Y1, Y2) considerably according to our results. The advantage of the
Pandemiconomics-Index on the Lorenz curve (Gini coefficient) is that we can observe the
main factors (causes) the poverty in any country directly under the observation of a single
geometrical figure in a constant movement in the same graphical space and time respectively.
However, the Lorenz curve (Gini coefficient) only shows the income distribution without
any reason to explain the main factors that can influence the faster expansion of income
inequality anywhere and anytime (see Figure 3).

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Fig. 2 Gini Coefficient and Lorenz Curve

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Fig. 3 The Pandemiconomics-Index for U.S., Brazil, Russia, India, United Kingdom, Peru,
Chile, Spain, Italy, and Iran

Source: World Bank (2020)

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 8. Concluding Comment
Firstly, this research presents a new analytical tool to study the income inequality of
any country from a multidimensional perspective. The results show that Pandemiconomics-
Index can provide a series of negative factors that affect the analysis of income inequality.
The Pandemiconomics-Index can be a powerful and effective analytical toolbox in the study
of the income inequality of anywhere and anytime. We assume that the Lorenz Curve (Gini
coefficient) can be considered a complementary analytical tool into the octahedron of
poverty. Finally, this paper concludes that COVID-19 can show the level of income
inequality according to preliminary results from the top ten countries with more COVID-19
infected cases subsequently.

9. References

Gini, C. (1912). “On the Measurement of Concentration and Variability of Characters”,

METRON –International Journal of Statistics, 63(1): 3-38.

Ruiz Estrada, M.A. (2011). “Policy Modeling: Definition, Classification and Evaluation”,
Journal of Policy Modeling, 33(4): 523-536.

Ruiz Estrada, M.A. and Yap, S.F. (2013) ‘The Origins and Evolution of Policy Modeling’.
Journal of Policy Modeling. 35(1): 170-182.

Ruiz Estrada, M.A. (2017). “An Alternative Graphical Modeling for Economics:
Econographicology”, Quality and Quantity, 51(5): 2115-2139.

Ruiz Estrada, M.A. Park, D., (2018). “The Past, Present, and Future of Policy Modeling”,
Journal of Policy Modeling, 40(1): 1-15.

Electronic Data:
Our World in Data (2020). Database. https://ourworldindata.org/grapher/gini-index-of-
consumption-in-2015-vs-1990-gcip-survey-years-only?country=CHN+USA+CHL+GTM .
Accessed on November 15, 2019.
World Bank (2020). Annual report. http://www.wb.org. Accessed on September 1, 2019.

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