Report
Patrick Artus

From a normative viewpoint, what income distribution is desired after the COVID crisis?

The COVID crisis will certainly generate a perpetual loss of GDP levels compared to what they would have been without the crisis. So what income distribution is desired in OECD countries? It is not possible for the income loss to be permanently offset by a monetised fiscal deficit. If companies bear the income loss, household income and spending are preserved, but the fall in earnings will lead to either a fall in investment or to corporate borrowing (as we saw after the subprime crisis in the first case in Italy and in the second in France). If households bear the income loss, their demand will be weakened, but companies' ability to invest will be preserved (as we have seen in OECD countries other than France and Italy). We believe the latter possibility is preferable as it preserves potential growth or prevents corporate over-indebtedness.
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Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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