How does exposure to COVID-19 influence health and income inequality aversion?

We study individual aversion to health and income inequality in three European countries (the United Kingdom, Germany, and Italy), its determinants and especially, the effects of exposure to three types of COVID-19 specific shocks affecting individuals' employment status, their income and health. Next, using evidence of representative samples of the population in the UK, we compare levels of health- and income-inequality aversion in the UK between the years 2016 and 2020. We document evidence of a significant increase in inequality aversion in both income and health domains. However, we show that inequality aversion is higher in the income domain than in the health domain. Furthermore, we find that inequality aversion in both domains increases in age and education and decreases in income and risk appetite. However, people directly exposed to major health shocks during the COVID-19 pandemic generally exhibited lower levels of aversion to both income and health inequality. Finally, we show that inequality aversion was significantly higher among those exposed to higher risk of COVID-19 mortality who experienced major health shocks during the pandemic.

Automated summary

In this study, we examine individuals' aversion to health and income inequality in the United Kingdom, Germany, and Italy, and explore the determinants of such aversion. We also investigate the impact of COVID-19 specific shocks on employment status, income, and health. Our findings reveal a significant increase in inequality aversion in both income and health domains, with higher aversion in the income domain. We further identify age, education, income, and risk appetite as factors affecting inequality aversion. Interestingly, individuals directly exposed to major health shocks during the pandemic exhibit lower aversion to both income and health inequality. Additionally, we find that those exposed to higher COVID-19 mortality risk and major health shocks experience significantly higher levels of inequality aversion.