CONTACT-INTENSITY, DISRUPTIONS IN THE CULTURAL SECTOR AND WAGE INEQUALITY: A MODEL OF COVID-19 CRISIS AND ITS IMPACT

Abstract

COVID-19 has adverse impacts on contact-intensive sectors, viz., manufacturing, tourism, and the entertainment sector (ES). In a general equilibrium (GE) model with online, entertainment and informal sectors employing skill, unskilled, and capital, we show that COVID-19 could cause polarization pushing contact-intensive entertainment industry on the brink of collapse while the other two survive. Dual roles of factor intensity and contact intensity (CI) contribute to such finite changes, triggering inter-skill wage inequality. This is the first of its kind to offer a theoretical mechanism capturing the contractionary effects on contact-intensive sectors and wage inequality. These results match with the literature emphasizing the hardships faced by the cultural sector.