Distributional effects of COVID-19

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.