Aug 9th, 2021

Productivity and the Pandemic: Short-Term Disruptions and Long-Term Implications

This paper analyses quarterly estimates of productivity growth at industry level for three advanced economies, France, the United Kingdom, and the United States, 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.

The paper also experiments with US data on employment at county level by allocating within-industry productivity contributions for 2020 to urban, sub-urban and rural areas, showing that the contributions to within-industry productivity growth from manufacturing and other production industries in urban and suburban areas increased during the pandemic. 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.

Themes

  • Social, environmental & technological transitions

Published

09/08/2021

Cite

B. van Ark, K. de Vries, A. Erumban Productivity and the Pandemic: Short-Term Disruptions and Long-Term Implications, Bart van Ark, Abdul Erumban, Klaas de Vries (August 2021) The Productivity Institute Working Paper 007
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