Contact-Intensity, Collapsing Entertainment Sector and Wage Inequality: A Finite Change Model of COVID-19 Impact

Abstract

In a general equilibrium 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 other two survive. Dual roles of factorintensity and contact-intensity contribute to such finite changes, triggering inter-skill wage inequality.

Contact Intensity, Unemployment, and Finite Change—The Case of Entertainment Sector Under Pandemic: A General Equilibrium Approach

“…For example, the entertainment or the culture sector needs specific skills (opera singer, ballet dancer, or a theater personality needs skills which is not necessary to run an online or virtual trade requiring expertise in software or programming like engineers do). However, to handle multiple level of skills across laborers and multiple outputs we go beyond the standard HOS types to propose a mixed specific factor hybrid model a la Marjit (1990Marjit ( & 2009, Marjit (1992 &2009), Marjit and Das (2021), Marjit and Acharyya (2003), Jones (2019), Das et al (2020), to name a few.…”

“…Then 9 K could be a 'wage fund' where financing occurs as if: K=WxSx+WySy+WL . See and Marjit and Das (2021). Here endowment effect could be analyzed.…”

“…Assumption of malleability of 'K' across X, Y and Z is driven by simplicity because our primary objective is to model the impact on the labor markets. Not only that, 'K' can also be considered as 'financial capital' providing funds to run these sectors (seeMarjit and Das 2021). Of course, realistically nature of physical capital used in different sectors can be different.…”