Income Convergence or Divergence in the Aftermath of the COVID-19 Shock?

The paper extends the work of Deaton (2021) by exploring the period of post-crisis recovery in 2021-2024. The paper documents per-capita income divergence during the period of post-shock recovery, with countries at the bottom of the income distribution falling significantly behind. Findings suggest that higher COVID-19 vaccination rates and targeted virus containment measures are associated with faster recovery in per capita incomes in the medium term. Evidence on the effectiveness of economic support policies for reducing cross-country income inequality, including fiscal and monetary policies, is mixed especially in the case of developing countries.