AC 95 Accounting Research Methods

Subject Professor: Raymond S. Pacaldo, CPA, MSA

2nd Semester 2020 - 2021

Name: Christine G. Uriarte Course and Year BS Accountancy – 3rd Year

Accounting Research Analysis

New Insights The paper provides timely philosophies in understanding the effect of
the still-present pandemic into the stability of society, efficiency of
state policies, and ultimately to economic disparities.
Importance Data derived from the paper does not only help in understanding the
social, political, and economic viewpoints of the underlying global
situation but more importantly it has the potential to guide in the
formulation of a better countermeasure against the crisis.
Motivation With the jolt brought by the unanticipated crisis, impulses are triggered
to gather information revolving on such issue and to try to get a sense
out of it. Particularly the researchers were inspired by recent relevant
discussions of: Milanovic, 2020 “Four Types of Labour: Global
Inequality”; ILO, 2020 “COVID-19 and World of Work: Impacts and
Responses”; Dingel and Neiman, 2020 “How Many Jobs Can Be Done at
Home”; and Barbiere et al., 2020 “Italian Workers at Risk During the
COVID-19 Epidemic.”
Problem Statement How economic inequality adds up to the fragility of social collapse
brought by a trade-off between the recent health and fiscal
trepidations.
Theoretical A theoretical framework was laid to create an analysis of how income
Framework inequality fuels the possibility of societal breakdown in the midst of a
tension between easing the healthcare harms and avoiding a
devastating supply-and demand-sided crisis. The researchers grounded
on the theories of economists and analysts’ concerns which are not
only limited to macroeconomic aggregates but extensive to distributive
aspects. Particularly works of: Guerrieri et al.,2020 “Macroeconomic
Implications of COVID-19: Can Negative Supply Shocks Cause Demand
Shortages?”; Ahmed et al., 2020 “Why inequality could spread COVID-
19”; Fisher and Bubola, 2020 “As Coronavirus Deepens Inequality,
Inequality Worsens its Spread”; and Milanovic, 2020 “The Real
Pandemic Danger Is Social Collapse, Foreign Affairs” were used as
supports by the researchers.
Research Method An ex-ante microsimulation approach had been adopted to simulate
the effects of the economic lockdown on inequality. It is a tool that has
been increasingly applied in analysis of poverty, social welfare, and the
like as presented in the study of Bourguignon and Spadaro, 2006
“Microsimulation as a Tool for Evaluating Redistribution Policies.”
Sample Selection The method was applied to the latest available European Union
AC 95 Accounting Research Methods
Subject Professor: Raymond S. Pacaldo, CPA, MSA
2nd Semester 2020 - 2021

surveys particularly EU –Survey on Income and Living Conditions (SILC)

data referring to year 2018 and 31 countries comprising the EU-27 with
the inclusion of the UK, Norway, Switzerland and Serbia.
Validity issues Apparent validity issue lies in the absence of any extraordinary
countervailing measure in the conducted simulations. This resulted in a
divergence from a closely-similar approach and a consequence of
potential upper bounds results. Further, it also admitted that other
important distributive dimensions are necessarily left out and the
analysis only marginally accounts for the relevant role of informal
economy possibly causing attenuation.
Analysis A strong negative correlation has been derived in vulnerability of
labour income corresponding to country level size of public
administration and the strength of social and employment protection
system. An empirical outcome corroborative to the framework
indicates that countries with higher levels of inequality before the
lockdown are likely to experience its sharpest increase of inequality.
Further, the most restrictive lockdown scenarios without specific
countervailing measures would result in a large increase of the
inequality. Interestingly, the economies of Czech Republic and Slovakia,
despite belonging to low inequality countries, still encountered
significant increase of inequality due to the fragility of their main
income sources, employment structure, and vulnerability levels. A
household with intensive reliance on social transfers, which lies on the
bottom of income distribution during the pre-pandemic, suffers less
loss than those relying on vulnerable income sources during pandemic.
The analysis also showed that with the sector of vulnerable labour
income, the longer the restrictive measures last, the more households
in such a sector would be dragged to poverty. However, the magnitude
of poverty change would remarkably differ across countries given
several other conditions such as GDP and public budget constraints.
Conclusions The study has been concluded with a philosophy that outbreaks of a
pandemic can challenge the stability and sustainability of economic
systems if effective and timely economic compensation measures are
not taken. Substantial increase in economic disparities will most likely
happen when economy is shut down. It shows that the cost to slow
down the health contagion extends to sacrificing economic conditions.
Their simulations show that the challenge is worse for countries
endemically characterised by higher inequality. Moreover, it ends with
taking up a lesson from the crisis that global transmission of negative
shocks does not only concern the economic and financial sphere of its
own but health risk can spill over and affect the whole. With these,
AC 95 Accounting Research Methods
Subject Professor: Raymond S. Pacaldo, CPA, MSA
2nd Semester 2020 - 2021

policy options seemed to be a choice of either reinforcing international

policy cooperation in all fields (health, finance, economy) or
challenging the long-time globalization trend by limiting drastically the
interactions with the rest of the world.

Impact of the Research

The globe, in its current experience of a paradigm shift, can gain out of it by collecting
well-founded knowledge and by using it towards improvement and origination of better future
countermeasures should another adversity arise. The research entitled “Social Stability
Challenged by COVID-19: Pandemics, Inequality, and Policy Responses” by Cristiano Perugini
and Marko Vladisavljevic had made its impact by contributing insightful ideas highlighting the
significance of social, political, and economic domains especially in a midst of a crisis. It points
out that leaving one of these domains unattended will bring us to the brink of a collapse.
Moreover, it speaks that inequality should substantively be resolved since it is a factor that
fuels a devastating spiral. Perhaps a good discernment of the recent global situation calls for a
mutual help mechanism across the countries especially towards the most vulnerable in order to
prevent the spread of the unwanted and achieve the best interest of all.