Rise in income inequality due to pandemic in developing economies

Abstract The outbreak of coronavirus pandemic (COVID‐19) has severely affected global economies and Pakistan. The core focus of this study is to analyse income inequality before and after the pandemic in developing economies and other urbanised areas of Pakistan. Gini coefficient has been employed to estimate income inequality for developing economies and Pakistan, whereas the Theil index is assessed across the regions, provinces and other urban areas of Pakistan. For that purpose, the study has worked on ‘special survey evaluating the Socio‐economic Impact of COVID‐19 on the well‐being of people’ published by the Pakistan Bureau of Statistics. This study focuses on seeing the consequences of COVID‐19, especially in the context of income inequality caused by the lockdown imposed in the countries in hand. Further, determinants of income inequality are estimated before and after the pandemic. This study anticipates that fair income distribution is the only solution to decrease disparities. Moreover, to achieve goal 10 of Sustainable Development Goal, it is significant to work on provision of opportunities that help in increasing the income opportunities for the underprivileged segment of society. This solution is achievable only if the provision of education and employment increases, eventually reducing the ever‐increasing wage gap in the long run. So far no study has empirically evaluated the impact of income inequality caused by the pandemic in Pakistan on the district level. The novelty of the study is that it has assessed the impact of income inequality before and after the pandemic in developing economics and than evaluated the urbanized areas of Pakistan on the basis of income inequality post and pre‐pandemic situation, hence fill the research gap as no study so far has been done on it.