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.
Highlights
In 2020, the COVID-19 pandemic dramatically disrupted people’s lives as well as their economic fortunes in the short-term with possible consequences for the longterm
Our analysis suggests that digital transformation seems to have progressed during the pandemic through favourable productivity gains in industries that are above-average users of digital technologies
Our results indicate that digital transformation during the pandemic seems to have progressed in industries with above-average digital intensity
Summary
In 2020, the COVID-19 pandemic dramatically disrupted people’s lives as well as their economic fortunes in the short-term with possible consequences for the longterm. After adjusting for the large industry reallocation effects, and with the notable exception of the collapse in productivity in the hospitality and culture sector, the within-industry growth patterns during the pandemic showed no clear deviation from the slowing long-term productivity trend as established in our earlier work (van Ark et al 2019, 2021). This sobering conclusion implies by no means that the pandemic could not turn out to be a source of a potential sustained productivity improvement during the postpandemic period. In the final section we conclude by outlining the implications of the pandemic for productivity growth in the long-term
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