The Effects of COVID-19 and JobKeeper on Productivity-Enhancing Reallocation in Australia

Dan Andrews, Elif Bahar and Jonathan Hambur

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: The consequences of the pandemic for potential output will partly hinge on its impact on productivity-enhancing reallocation. While recessions can accelerate this process, the more ‘random’ nature of the COVID-19 shock coupled with policy responses that prioritised preservation could disrupt productivity-enhancing reallocation. Our analysis based on novel high-frequency employment data for Australia shows that labour reallocation (and firm exit) remained connected to firm productivity over 2020 and 2021. However, outside of the initial acute phase of the shock the relationship weakened significantly compared to history. Australia’s job retention scheme (JobKeeper) initially reinforced the connection between growth and productivity, supporting more productive firms. But it became more distortive over time and as the economy recovered.

Keywords: COVID-19; productivity; reallocation; recessions (search for similar items in EconPapers)
JEL-codes: E24 E32 J63 O4 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2023-07
New Economics Papers: this item is included in nep-bec, nep-eff and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-29

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