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Did Covid-19 strengthen the relationship between human capital and income? Evidence from administrative data

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  • Merilen LAURIMAE

    (University of Tartu)

  • Tiiu PAAS

    (University of Tartu)

Abstract

This study investigates the role of accumulated human capital in how people adapt to shocks and how this is reflected in income dynamics. The analysis is based on detailed monthly administrative data from Estonia between 2016 and 2020, containing more than 800 thousand observations. The results show that people with higher human capital experience less income fluctuation and their potential for income losses is lower. The role of human capital becomes even more significant during a crisis. An important effect of subsidies was also evident during the crisis, when the risk of losing incomes for people with less accumulated human capital would have been even higher if there had been no additional state support in the form of subsidies and benefits. In light of the Covid-19 crisis and its specifics, it is crucial to continuously improve digital skills through education to cope with socio-economic development in the future.

Suggested Citation

  • Merilen LAURIMAE & Tiiu PAAS, 2024. "Did Covid-19 strengthen the relationship between human capital and income? Evidence from administrative data," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 15, pages 134-156, June.
    • Handle: RePEc:jes:journl:y:2024:v:15:p:134-156
    DOI: https://doi.org/10.47743/ejes-2024-0106
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    References listed on IDEAS

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    1. Adams-Prassl, Abi & Boneva, Teodora & Golin, Marta & Rauh, Christopher, 2020. "Inequality in the impact of the coronavirus shock: Evidence from real time surveys," Journal of Public Economics, Elsevier, vol. 189(C).
    2. Zimpelmann, Christian & Gaudecker, Hans-Martin von & Holler, Radost & Janys, Lena & Siflinger, Bettina, 2021. "Hours and income dynamics during the Covid-19 pandemic: The case of the Netherlands," Labour Economics, Elsevier, vol. 73(C).
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