A General Equilibrium Assessment of COVID-19’s Labor Productivity Impacts on China’s Regional Economies

Abstract

This study introduces a database that can be used to analyze COVID19’s impacts on China’s regional economies. This database contains various sectoral and regional economic outcomes at the weekly and monthly level. In the context of a general equilibrium trade model, we first formulate a mathematical representation of the Chinese regional economy and calibrate the model with China’s multiregional input-output table. We then utilize the monthly provincial and sectoral value-added and national trade series to estimate COVID-19’s province-by-month labor-productivity impacts from February 2020 to September 2020. Compared to February 2019 levels, we find an average 39.5% decrease in labor productivity (equivalent to around 305 million jobs) and an average 25.9% decrease in welfare across provinces in February 2020. Both labor productivity and welfare have recovered quickly since April 2020. As of September 2020, average provincial labor productivity increased by 12.2% (equivalent to around 94 million jobs) and average welfare increased by 8.2% relative to their September 2019 levels.