Simulating the Impact of the 2009 Financial Crisis on Welfare in Latvia

This note details simulations of the distributional impacts of the 2009 financial crisis on households in Latvia. It uses household survey data collected prior to the crisis and simulates the impact of the growth slowdown. The simulations show that...

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Bibliographic Details
Main Authors:	Ajwad, Mohamed Ihsan, Haimovich, Francisco, Azam, Mehtabul
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTING AGE GROUP AGGREGATE POVERTY AVERAGE WAGE CAPITAL INVESTMENTS CHANGES IN POVERTY DEVELOPED COUNTRIES DEVELOPING COUNTRY DEVELOPING WORLD DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISTRIBUTIONAL EFFECTS DISTRIBUTIONAL IMPACT ECONOMIC CONTRACTION ECONOMIC SHOCKS ECONOMIC SLOWDOWN EDUCATION LEVEL EMPLOYMENT PROBABILITY FAMILY BENEFITS FEMALE LABOR FEMALE LABOR FORCE FEMALE WORKERS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL MARKETS FORMAL SECTOR LAYOFFS FORMAL SECTOR WAGE GENERAL EQUILIBRIUM GINI COEFFICIENT GLOBAL ECONOMY GLOBAL POVERTY GROWTH RATE GROWTH RATES HOUSEHOLD BUDGET HOUSEHOLD INCOME HOUSEHOLD INCOMES HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLD WELFARE HOUSING HUMAN CAPITAL HUMAN DEVELOPMENT INCOME DATA INCOME DISTRIBUTION INCOME EQUAL INCOME INEQUALITY INCOME SHOCKS INEQUALITY CHANGES INFORMAL EMPLOYMENT INFORMAL SECTOR JOBS JOBS CRISIS LABOR FORCE LABOR LAWS LABOR MARKET LABOR MARKET ADJUSTMENT LABOR MARKETS LABOUR LAYOFF MACROECONOMIC FRAMEWORK MACROECONOMIC POLICIES MEASURING POVERTY MICRO MODEL MINIMUM WAGE NATIONAL POVERTY OLDER WORKERS OUTPUT GROWTH PENSION INCOME PER CAPITA EXPENDITURE PER CAPITA INCOME PER-CAPITA INCOME POLICY REFORMS POLICY RESEARCH POLITICAL ECONOMY POOR HOUSEHOLDS POOR PEOPLE POOR REGION POOR RURAL HOUSEHOLDS POVERTY GAP POVERTY INCREASE POVERTY LEVEL POVERTY LINE POVERTY OUTCOMES POVERTY RATE POVERTY RATES POVERTY REDUCTION POVERTY REDUCTION STRATEGIES POVERTY THRESHOLD PRIMARY SOURCE PRODUCT MARKETS PROGRAM COSTS PUBLIC POLICIES PUBLIC WORKS PUBLIC WORKS PROGRAM REFORM PROGRAM RELATIVE PRICES RURAL AREAS SAFETY SAFETY NET SAFETY NET PROGRAMS SEVERANCE PAYMENTS SOCIAL PROTECTION TOTAL UNEMPLOYMENT UNEMPLOYED UNEMPLOYED PEOPLE UNEMPLOYED PERSON UNEMPLOYED WORKERS UNEMPLOYMENT UNEMPLOYMENT BENEFIT UNEMPLOYMENT BENEFITS UNEMPLOYMENT INSURANCE UNEMPLOYMENT INSURANCE BENEFITS UNSKILLED WORKER UNSKILLED WORKERS VULNERABLE GROUPS WAGE GROWTH WAGE INEQUALITY WAGE RATES WAGES WELFARE IMPACT WORKER WORKERS YOUNGER WORKERS
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120131083441 http://hdl.handle.net/10986/3245

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Summary:	This note details simulations of the distributional impacts of the 2009 financial crisis on households in Latvia. It uses household survey data collected prior to the crisis and simulates the impact of the growth slowdown. The simulations show that Latvia experienced a sharp rise in poverty, widening of the poverty gap, and a rise in income inequality due to the economic contraction in 2009. The 18 percent contraction in gross domestic product (affecting mainly trade hotels and restaurants, construction, and manufacturing) likely led the poverty head count to increase from 14.4 percent in 2008 to 20.2 percent in 2009. The poverty gap, which measures the national poverty deficit, was simulated to increase from 5.9 percent in 2008 to 8.3 percent in 2009. The analysis finds that the results are robust to most assumptions except post-layoff incomes, which substantially mitigated household welfare. The authors also simulate the impact of Latvia's Emergency Social Safety Net components and find that the Safety Net likely mitigated crisis impacts for many beneficiaries. The simulations measure only direct short-run impacts; hence, they do not take into account general equilibrium effects. Post-crisis income data from a different data source suggest that poverty rates increased by 8.0 percentage points between 2008 and 2009. As a result, the authors suggest that their ex-ante simulation performs reasonably well and is a useful tool to identify vulnerable groups during the early stages of a crisis.

Simulating the Impact of the 2009 Financial Crisis on Welfare in Latvia

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