Covid and productivity in Europe: A responsiveness perspective

Russell Cooper, Carl-Wolfram Horn and Leonardo Indraccolo

European Economic Review, 2024, vol. 163, issue C

Abstract: This paper studies the effects of Covid-19 on manufacturing output, employment and productivity across a set of European countries. Using a quantitative firm dynamics model with endogenous entry and exit, key parameters of adjustment costs and market power are estimated to match country-specific responsiveness of firms to exogenous shocks. The estimated model is used to simulate the effects of the Covid-19 shock, with and without policy measures. As seen through counterfactual exercises, the main impact of the policy interventions, treated here as work-sharing schemes targeted to low profitability firms and “no-firing” obligations, was to mitigate the drop in aggregate employment by keeping firms in business. Depending on the country, we calculate that the aggregate drop in employment would have been between 1.0 and 1.9 percentage points higher without policy support. We do not find evidence of adverse productivity effects from these interventions. From these counterfactuals, we establish the importance of targeted subsidies and the sensitivity of employment responses to firm beliefs.

Keywords: COVID-19; Responsiveness; Labor adjustment frictions; Productivity (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292123002830
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:163:y:2024:i:c:s0014292123002830

DOI: 10.1016/j.euroecorev.2023.104655

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().