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Productivity and the pandemic: short-term disruptions and long-term implications

Author

Listed:
  • Klaas Vries

    (The Conference Board)

  • Abdul Erumban

    (University of Groningen)

  • Bart Ark

    (University of Manchester)

Abstract

This paper analyses quarterly estimates of productivity growth at industry level for three advanced economies, France, the UK and the US, for 2020. We use detailed industry-level data to distinguish reallocations of working hours between industries from pure within-industry productivity gains or losses. We find that all three countries showed positive growth rates of aggregate output per hour in 2020 over 2019. However, after removing the effects from the reallocation of hours between low and high productivity industries, only the US still performed positively in terms of within-industry productivity growth. In contrast, the two European economies showed negative within-industry productivity growth rates in 2020. While above-average digital-intensive industries outperformed below-average ones in both France and the UK, the US showed higher productivity growth in both groups compared to the European countries. Industries with medium-intensive levels of shares of employees working from home prior to the pandemic made larger productivity gains in 2020 than industries with the highest pre-pandemic work-from-home shares. Overall, after taking into account the productivity collapse in the hospitality and culture sector during 2020, productivity growth shows no clear deviation from the slowing pre-pandemic productivity trend. Future trends in productivity growth will depend on whether the favourable productivity gains (or smaller losses) in industries with above-average digital intensity will outweigh negative effects from the pandemic, in particular scarring effects on labour markets and business dynamics.

Suggested Citation

  • Klaas Vries & Abdul Erumban & Bart Ark, 2021. "Productivity and the pandemic: short-term disruptions and long-term implications," International Economics and Economic Policy, Springer, vol. 18(3), pages 541-570, July.
    • Handle: RePEc:kap:iecepo:v:18:y:2021:i:3:d:10.1007_s10368-021-00515-4
    DOI: 10.1007/s10368-021-00515-4
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    References listed on IDEAS

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    Cited by:

    1. Peter Goodridge & Jonathan Haskel, 2023. "Accounting for the slowdown in UK innovation and productivity," Economica, London School of Economics and Political Science, vol. 90(359), pages 780-812, July.
    2. Melissa van Rensburg, 2023. "Long-run trends in New Zealand’s real neutral interest rate," Treasury Analytical Notes Series an23/05, New Zealand Treasury.
    3. Bart Ark & Dirk Pilat, 2024. "Productivity drivers and pro-productivity policies: G20 economies, India and South Korea," Indian Economic Review, Springer, vol. 59(1), pages 95-121, October.
    4. Diane Coyle & Jen‐Chung Mei, 2023. "Diagnosing the UK productivity slowdown: which sectors matter and why?," Economica, London School of Economics and Political Science, vol. 90(359), pages 813-850, July.
    5. Eichengreen, Barry, 2022. "COVID and the outlook for emerging markets," Journal of Policy Modeling, Elsevier, vol. 44(4), pages 820-826.
    6. Vinish Kathuria & Rajesh Raj Natarajan, 2022. "What Role Has Structural Change Played in Growth Accelerations for the Indian States? An Analysis for Pre- and Post-liberalization Periods," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 23(1), pages 61-85, March.
    7. Chiang Kao & Yuan-Ying Wang & Tsai-Chi Ho & Yu-Shian Chen & Ping-Chieh Chen, 2022. "The Impact Of Covid-19 On The Productivity Of Large Companies In Taiwan," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 16(1), pages 30-40.
    8. Tomoyuki Yagi & Kakuho Furukawa & Jouchi Nakajima, 2022. "Productivity Trends in Japan - Reviewing Recent Facts and the Prospects for the Post-COVID-19 Era -," Bank of Japan Working Paper Series 22-E-10, Bank of Japan.
    9. Bart van Ark & Dirk Pilat & Klaas de Vries, 2023. "Are Pro-Productivity Policies Fit for Purpose? Productivity Drivers and Policies in G-20 Economies," Working Papers 038, The Productivity Institute.

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    More about this item

    Keywords

    Productivity; Pandemic; Labour reallocation; Digital transformation; Work-from-home;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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