Assessing the Income Distributional Effect of Lockdowns in Malaysia

Abstract

This paper examines the distributional effect of lockdown measures on the loss of income. The significance of the study relates to the use of daily data on loss of income and lockdown measures arising from the unprecedented COVID-19 pandemic. A conditional variable of the total loss of income was evaluated using hypothesized variables of international restrictions, domestic movement restrictions, public events closure, restriction on gathering, stay at home restrictions, school closure, and workplace closure. For a robust result, the study applied four variants of regression such as Ordinary Least Squares (OLS), Fully Modified OLS, Dynamic OLS, and Autoregressive Distributed Lag (ARDL) as the empirical methods. The findings revealed that loss of income during the COVID-19 period has a positive and significant relationship with the lockdown measures in Malaysia. This implies that as the government strengthens the international and domestic movement restrictions to reduce the impact of COVID-19, the most vulnerable income groups lose their income. This finding is relevant to policymakers regarding plans to rebuild a resilient economy to withstand future pandemics. Policy strategies to reduce restriction measures and allow for opening up the economy to enable the vulnerable income groups to regain their jobs and hence the lost income was discussed.