Abstract
This study examines the impact of the 2003 SARS epidemic on the total factor productivity (TFP) of Chinese industrial enterprises using a difference-in-differences (DID) approach. The results exhibit that SARS significantly reduces TFP by 3.12–5.81%, lasting for three to five years. Further, this impact is heterogeneous across industries. A significantly negative impact is found in labor intensive industries, while capital and technology intensive industries is less affected. Contrarily, a significantly positive impact is observed in those industries necessary for life and production. Mechanism tests show that the impact on TFP is caused by a reduction in labour productivity and a decrease in innovation investment after SARS outbreak. This study highlights the importance of more targeted policy on Covid-19 and similar epidemics both in industrial, national and international level.
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