The Impact of Covid-19 on Productivity

27 Pages Posted: 21 Dec 2020 Last revised: 12 Sep 2021

See all articles by Nicholas Bloom

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Philip Bunn

Bank of England

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Pawel Smietanka

Bank of England

Greg Thwaites

University of Nottingham

Multiple version iconThere are 2 versions of this paper

Date Written: December 2020

Abstract

Productivity is a key determinant of the sustainability of the public finances. While the initial impact of Covid-19 on labor productivity growth shows a surprisingly positive impact, the impact on total factor productivity (TFP) is less clear. We evaluate this with new survey data on labor and capital inputs, outputs and prices from a UK firm panel survey. We find that Covid-19 reduced private sector TFP by up to 4% during the pandemic, with a projected 1% reduction over the medium term. These numbers comprise a large reduction in ‘within-firm’ productivity as intermediate costs increased due to measures like protective equipment, screens, hand sanitizer and lower capacity utilization. This was partly offset, however, by a positive ‘between-firm’ effects as less productive sectors, and less productive firms within them, contracted. This highlights how the Covid-19 shock has had large, but offsetting, within and between firm impacts on aggregate TFP.

Suggested Citation

Bloom, Nicholas and Bunn, Philip and Mizen, Paul and Smietanka, Pawel and Thwaites, Greg, The Impact of Covid-19 on Productivity (December 2020). NBER Working Paper No. w28233, Available at SSRN: https://ssrn.com/abstract=3753143

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

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Philip Bunn

Bank of England ( email )

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Paul Mizen

University of Nottingham ( email )

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Bank of England

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Centre for Economic Policy Research (CEPR)

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Pawel Smietanka

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Greg Thwaites

University of Nottingham

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