Work from home, labour market participation and employment

Abstract

We examine how the pandemic-driven rise in work from home (WFH) has affected labour market participation and employment in Italy. Leveraging a unique administrative dataset covering the population of remote workers, we find that WFH has had a positive effect on both activity and employment rates at the local labour market (LLM) level. To address endogeneity concerns, we instrument the observed increase in WFH with its potential, derived from LLM sectoral compositions. Controlling for several demographic and economic factors that could affect the distribution of WFH potential, we find no evidence of pre-trends. We also explore the mechanisms driving our results. The impact is stronger in response to the increase in WFH among women of child-rearing age and in areas with limited childcare services. We also find that the effect is more pronounced in the South and in less densely populated areas. These findings suggest that WFH can play a role in terms of labour market inclusion.