Sectoral Digital Intensity and GDP Growth After a Large Employment Shock: A Simple Extrapolation Exercise

Giovanni Gallipoli () and Christos Makridis

No 2020-056, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: We examine the dynamics of GDP following an economy-wide pandemic shock that curtails physical mobility and the ability to perform certain tasks at work. We examine whether greater reliance on digital technologies has the potential to mediate employment and productivity losses. We employ industry-level indices of task-based digital intensity and ability to work from home (“home-shorability†), in conjunction with publicly available data on employment and GDP for Canada, and document that: (i) employment responses after the onset of the shock are milder in digitally-intensive sectors; (ii) conditional on the size of employment changes, GDP responses are less extreme in IT-intensive sectors. We suggest a simple state-dependent algorithm for predicting output dynamics as a function of employment across industries and locations with different digital intensity. In our baseline scenario, aggregate output returns to pre-crisis levels eight quarters after the initial shock onset, although we find significant heterogeneity in recovery patterns across sectors.

Keywords: output; digital intensity; employment; Canada; coronavirus; Structural change (search for similar items in EconPapers)
JEL-codes: E32 E66 J21 J23 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-lma, nep-mac and nep-ure
Note: M
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Gallip ... nsity-gdp-growth.pdf First version, July 25, 2020 (application/pdf)
http://humcap.uchicago.edu/RePEc/hka/wpaper/Gallip ... -gdp-growth_rev1.pdf Second version, August 28, 2020 (application/pdf)

Related works:
Journal Article: Sectoral digital intensity and GDP growth after a large employment shock: A simple extrapolation exercise (2022)
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