Fair Choices During COVID-19: Firms’ Altruism and Inequality Aversion in Managing a Large Short-Time Work Scheme

Abstract Leveraging a unique dataset encompassing choices made by the entire universe of Italian manufacturing firms regarding a short-time work scheme (STW), we investigate the impact of the pandemic’s relative local severity on firms’ altruistic tendencies and preferences towards inequality. We use the decision to advance income support payments to workers as a measure of firm altruism and the choice concerning the concentration of STW working hours among the workforce as a gauge of inequality preferences. Adopting a natural experiment-like approach, we find that, controlling for regional and industry fixed effects, in areas more severely hit by the pandemic firms were more likely to advance the STW payment to their employees and to opt for a lower STW concentration. The effects we find are larger for firms characterized by more intense ties between entrepreneurs and workers, suggesting that the pandemic has mainly enhanced parochial pro-social behaviour.