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COVID-19 and the growth potential

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  • Grömling, Michael

Abstract

The lasting economic impact of the COVID-19 pandemic will become apparent in the development of the macroeconomic factors of production - labour, capital, human capital as well as the stock of technical knowledge. Changes in behaviour such as a greater acceptance of technology can strengthen potential output permanently. By contrast, negative effects may arise from growing protectionist attitudes or long-lasting uncertainties and 'scarring effects'. In any case, the crisis has induced a technology push. This may be intensified if digitisation gains additional support from investments in infrastructure or if the pandemic heralds a renaissance in the natural sciences - with a corresponding impact on human capital and physical capital as well as on technical knowledge. For the time being, it is unclear what the effects of restructuring and secular structural change will be on potential output. However, dangers are lurking in the acceleration of geopolitical tensions, a misunderstanding of technological sovereignty and increasing government interventions, which as a whole could hamper innovation and investment.

Suggested Citation

  • Grömling, Michael, 2020. "COVID-19 and the growth potential," IW-Reports 53/2020, Institut der deutschen Wirtschaft (IW) / German Economic Institute.
    • Handle: RePEc:zbw:iwkrep:532020
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    More about this item

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F20 - International Economics - - International Factor Movements and International Business - - - General

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