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Briefing Note: Medium-run wealth inequality following COVID-19

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Abstract

COVID-19 has led to a severe economic recession. We examine its potential medium-run effects on household-level wealth inequality in the UK. We use modelling analysis to study short and long recession scenarios. In the short recession scenario, there is a significant increase in wealth inequality characterised by a combination of a decrease in wealth accumulation for economically active households with lower income, an increase in wealth accumulation for households with higher incomes, and an increase in within-group inequality. In the long recession scenario, a worsening of the income and employment effects of the recession and a slower recovery lead to particularly severe wealth losses for economically active households with lower income, giving rise to a very large increase in inequality