Routinization and Covid-19: a comparison between United States and Portugal

Piero De Dominicis

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of this paper is to identify what is the role of automatization in increasing wage inequality, making a comparison between the two countries. Using PSID and Quadros de Pessoal, we find that labor income dynamics are strongly determined by the variance of the individual fixed component. This effect is drastically reduced by adding information on workers' occupational tasks, confirming that decreasing price of capital and the consequent replacement of routine manual workers have deepened wage inequality. During the current crisis, we find that the ability to keep working is strongly related with the occupation type. As such, we simulate the impact of a permanent demand shock using an overlapping-generations model with incomplete markets and heterogeneous agents to quantitatively predict the impact of Covid-19 and lockdown measures on wage premium and earnings inequality. We find that wage premia and earnings dispersion increase, suggesting that earnings inequality will increase at the expenses of manual workers.

Keywords: Routinization; Wage Inequality; Covid-19; Income processes; Teleworking (search for similar items in EconPapers)
JEL-codes: E21 J23 J31 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:101003

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