Covid-19 and intra-household financial coping strategies in Pakistan

Abstract

The economic challenges due to the Covid-19 are likely to be acuter in developing countries as their population predominantly relies on informal activities not protected through insurance or government support. To understand how people are coping with the Covid-19 challenges, this study investigates seven important financial coping strategies of households in Pakistan using a nationally representative large dataset of 6000 households. The data was collected by the government right after the acute stage of the Covid-19 to study the economic implications of pandemic. By using the binary logit regressions our results show that households exposed to a severe negative Covid-19 shock have higher odds of using their savings or investments, acquiring loans, quitting education of their children, not paying their utility bills, and selling their productive assets in comparison to the households unexposed to a severe Covid-19 shock. Furthermore, a gender-based comparison between severely affected male and female-headed households reveals that female-headed households are two times less likely to discontinue the education of their children, obtain informal loans, and sell their productive assets to cope with the Covid-19 shock. This reflects better financial management among female as compared to male-headed households. Lastly, compared to rural households, urban-affected households have higher odds of acquiring a formal loan. The findings highlight the severity of the pandemic in a developing country and call for a swift and targeted government response to ensure minimum well-being of the households.