The Impact of Covid-19 on Productivity

49 Pages Posted: 23 Dec 2020

See all articles by Nicholas Bloom

Nicholas Bloom

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

Phillip 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 21, 2020

Abstract

We analyse the impact of Covid-19 on productivity in the United Kingdom using data derived from a large monthly firm panel survey. Our estimates suggest that Covid-19 will reduce TFP in the private sector by up to 5% in 2020 Q4, falling back to a 1% reduction in the medium term. Firms anticipate a large reduction in ‘within-firm’ productivity, primarily because measures to contain Covid-19 are expected to increase intermediate costs. The negative ‘within-firm’ effect is partially offset by a positive ‘between-firm’ effect as low productivity sectors, and the least productive firms among them, are disproportionately affected by Covid-19 and consequently make a smaller contribution to the economy. In the longer run, productivity growth is likely to be reduced by diminished R&D expenditure and diverted CEOs’ time spent on dealing with the pandemic.

Keywords: Productivity, reallocation, Covid-19, growth

JEL Classification: L2, M2, O32, O33

Suggested Citation

Bloom, Nicholas and Bunn, Phillip and Mizen, Paul and Smietanka, Pawel and Thwaites, Greg, The Impact of Covid-19 on Productivity (December 21, 2020). Bank of England Working Paper No. 900, Available at SSRN: https://ssrn.com/abstract=3753742 or http://dx.doi.org/10.2139/ssrn.3753742

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

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HOME PAGE: http://economics.stanford.edu/faculty/bloom

National Bureau of Economic Research (NBER) ( email )

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Phillip Bunn

Bank of England ( email )

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Paul Mizen

University of Nottingham ( email )

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Bank of England

Threadneedle Street
London, EC2R 8AH
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Pawel Smietanka

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Greg Thwaites

University of Nottingham

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