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Eurasian Business Review

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19-01-2023 | Regular Article

Distributional effects of COVID-19

Authors: Carmen Aina, Irene Brunetti, Chiara Mussida, Sergio Scicchitano

Published in: Eurasian Business Review | Issue 1/2023

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Abstract

Using Italian Labour Force Survey data for the period 2019Q1-2020Q4 and applying quantile regression model accounting for sample selection bias, the paper investigates the effects of the first wave of the COVID-19 pandemic on the wage distribution of employees, exploiting differences across sectors and by working from home arrangement. The findings reveal that the pandemic seems to positively affect wages of the entire workforce. However, this short-term advantage might be temporary as potentially driven by occupational changes in employment composition, whereas teleworking arrangement entails a wage premium for all workers. Low paid workers, employed in hotel/restaurant sector and not teleworking during the outbreak, face a reduction in wages (− 13.7%), while employees of public administration and education sectors exhibit a wage premium. When considering the joint effect of COVID-19 and working from home arrangement, estimates show that, despite few exceptions, wages of teleworking employees have been not affected by the coronavirus. Finally, we also control for self-selection issue by implementing the inverse probability weighting estimator.

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For the sake of brevity, we do not report the descriptive statistics for the first stage estimates. These are available upon request.

Educational dummy indicators refer to the highest successfully completed educational attainment of the individual. The educational classification used to build these indicators is the ISCED 97. We have four categories: no education (none or elementary educational level), primary education (lower secondary educational level), secondary education (upper secondary level), and tertiary education (post-secondary, tertiary, or higher educational level).

NUTS is the acronym for “Nomenclatura delle unità territoriali statistiche”. Specifically, we refer to the first level of disaggregation, NUTS1, corresponding to the macro-region. According to this classification, there are four NUTS1 for Italy: North-West, North-East, Center, and South (and Islands).

The concept of first order stochastic dominance can evaluate a ranking for compared distributions. Let F and G denote the cumulative distribution functions of wages for two groups, e.g. workers with high and low WFH. First order stochastic dominance of F relative to G is defined as: F(z)—G(z) ≤ 0 uniformly in z ∈ R, with strict inequality for some z. To test whether there are statistically robust differences between distributions, we employ both the one-sided and two-sided K-S tests. The two-sided test (KS2) allows one to determine whether both distributions are identical, while the one-sided test (KS1) defines whether one distribution dominates the other. Thus, to assess that F stochastically dominates G, a rejection of the null hypothesis for the two-sided test is required, while the null for the one-sided test cannot be rejected.

We have also tried to estimate the correlation between household types and wages and the estimated coefficients are not statistically significant. This further reassures about our choice, as household type’s variables do not affect wages.

As a robustness check, we estimated our model on the sample including only permanent workers. Results are reported in Table 7 in the Appendix. The effect of COVID-19, WFH and their interaction, as well as individual characteristics remain unchanged. Only few differences for the joint effect of post-COVID-19, WFH, and sector: top workers in restaurant sector are negatively affected (not significant in our benchmark specification), while top workers in communication, education and other services sectors are now not significantly impacted. Overall, our findings are confirmed.

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Title: Distributional effects of COVID-19
Authors: Carmen Aina
Irene Brunetti
Chiara Mussida
Sergio Scicchitano
Publication date: 19-01-2023
Publisher: Springer International Publishing
Published in: Eurasian Business Review / Issue 1/2023
Print ISSN: 1309-4297
Electronic ISSN: 2147-4281
DOI: https://doi.org/10.1007/s40821-022-00230-3

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