Does COVID-19 Exacerbate Regional Income Inequality? Evidence from 20 Provinces of China

Abstract

The COVID-19 pandemic has had a profound impact on almost all aspects of society and the world’s economy. This study aimed to examine the impact of COVID-19 on regional income inequality in China. Based on provincial data from 20 provinces (covering 218 prefecture-level cities) for the period from 2013 to 2022, the study revealed the significant impact of COVID-19 on widening regional income inequality, using a continuous difference-in-differences (DID) model. The results were robust when applying a parallel trend test, lagging control variables, and alternative measures of regional income inequality to test the results. Additional analysis suggested that the adverse impact of COVID-19 on regional income inequality was increased by regions’ foreign trade dependence and their share in the service industry but may have been weakened by the development of the digital economy. The findings highlight the adverse effects of COVID-19 on regional income inequality.