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

Ajwad, Mohamed Ihsan ; Haimovich, Francisco ; Azam, Mehtabul

关键词: ACCOUNTING;    AGE GROUP;    AGGREGATE POVERTY;    AVERAGE WAGE;    CAPITAL INVESTMENTS;   

DOI  :  10.1596/1813-9450-5960
RP-ID  :  WPS5960

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This note details simulations of thedistributional impacts of the 2009 financial crisis onhouseholds in Latvia. It uses household survey datacollected prior to the crisis and simulates the impact ofthe growth slowdown. The simulations show that Latviaexperienced a sharp rise in poverty, widening of the povertygap, and a rise in income inequality due to the economiccontraction in 2009. The 18 percent contraction in grossdomestic product (affecting mainly trade hotels andrestaurants, construction, and manufacturing) likely led thepoverty head count to increase from 14.4 percent in 2008 to20.2 percent in 2009. The poverty gap, which measures thenational poverty deficit, was simulated to increase from 5.9percent in 2008 to 8.3 percent in 2009. The analysis findsthat the results are robust to most assumptions exceptpost-layoff incomes, which substantially mitigated householdwelfare. The authors also simulate the impact ofLatvia's Emergency Social Safety Net components andfind that the Safety Net likely mitigated crisis impacts formany beneficiaries. The simulations measure only directshort-run impacts; hence, they do not take into accountgeneral equilibrium effects. Post-crisis income data from adifferent data source suggest that poverty rates increasedby 8.0 percentage points between 2008 and 2009. As a result,the authors suggest that their ex-ante simulation performsreasonably well and is a useful tool to identify vulnerablegroups during the early stages of a crisis.