CSB Working Paper, 2023, 4: Balancing speed and effectiveness: smoothing income volatility through COVID19 social policy responses in Belgium

With the ever-changing COVID-19 situation and social distancing measures globally, policy makers were confronted with the challenge of organising timely measures that would protect households against income shocks and volatile incomes. As they generally have fewer alternatives, low-income households are especially vulnerable to the long-term scarring effects caused by volatile incomes. As such, the rise in income volatility due to the dynamic nature of the pandemic calls into question the adequa…

With the ever-changing COVID-19 situation and social distancing measures globally, policy makers were confronted with the challenge of organising timely measures that would protect households against income shocks and volatile incomes. As they generally have fewer alternatives, low-income households are especially vulnerable to the long-term scarring effects caused by volatile incomes. As such, the rise in income volatility due to the dynamic nature of the pandemic calls into question the adequacy of welfare states and additional social support measures implemented. Concurrently, researchers are challenged particularly by the scarcity of data in these circumstances. In this working paper, we contribute to the existing literature by presenting an analysis of a substantially broad range of social support measures implemented in Belgium during the COVID19 pandemic in 2020 as a case study. We use a non-parametric approximation of monthly incomes and monthly changes in employment based on aggregate administrative data, allowing us to estimate within-year income volatility. We evaluate the effectiveness of federal and regional measures in Belgium in mitigating income volatility and shocks and their timeliness for those who were economically affected by the social distancing measures. We find that differences in the targeting design of the main COVID-19 social policies in Belgium resulted in varying effectiveness in reducing income volatility as well as differences in targeting and poverty
reduction efficiency. We observe large heterogeneity in efficiency, especially among regional COVID-19 support measures.