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Is increasing productivity COVID-19's silver lining?

Joel Blit

No 30, CLEF Working Paper Series from Canadian Labour Economics Forum (CLEF), University of Waterloo

Abstract: Recent evidence for the U.S. suggests that recessions play a crucial role in promoting automation and the reallocation of productive resources, which in turn increase aggregate productivity and lead to a higher standard of living. I present evidence suggesting that the same is true in Canada. In particular, since the beginning of the information and communications technology revolution, fully all of the Canadian decline in routine job employment occurred during the three recessions. A similar dynamic is likely to transpire during the COVID crisis, and in fact is likely to be more pronounced due to the scale of the recession and the health-related incentives to automate. By constructing industry-level measures of worker exposure to COVID and the fraction of routine employment, I show that the retail, construction, manufacturing, wholesale, and transportation industries are likely to experience the biggest transformations. In these industries, government attempts to maintain the status quo will only delay the process of restructuring. Instead, policies should embrace change and support workers through the transition.

Keywords: COVID-19; recessions; productivity; innovation; automation (search for similar items in EconPapers)
JEL-codes: E32 J24 O38 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-hea
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