IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v163y2024ics0014292123002830.html
   My bibliography  Save this article

Covid and productivity in Europe: A responsiveness perspective

Author

Listed:
  • Cooper, Russell
  • Horn, Carl-Wolfram
  • Indraccolo, Leonardo

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.

Suggested Citation

  • Cooper, Russell & Horn, Carl-Wolfram & Indraccolo, Leonardo, 2024. "Covid and productivity in Europe: A responsiveness perspective," European Economic Review, Elsevier, vol. 163(C).
    • Handle: RePEc:eee:eecrev:v:163:y:2024:i:c:s0014292123002830
    DOI: 10.1016/j.euroecorev.2023.104655
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292123002830
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.euroecorev.2023.104655?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ryan A. Decker & John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2020. "Changing Business Dynamism and Productivity: Shocks versus Responsiveness," American Economic Review, American Economic Association, vol. 110(12), pages 3952-3990, December.
    2. Cosmin Ilut & Matthias Kehrig & Martin Schneider, 2018. "Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News," Journal of Political Economy, University of Chicago Press, vol. 126(5), pages 2011-2071.
    3. Jerome Adda & Russell W. Cooper, 2003. "Dynamic Economics: Quantitative Methods and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012014, December.
    4. Alessandro Di Nola & Leo Kaas & Haomin Wang, 2023. "Rescue policies for small businesses in the Covid-19 recession," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 579-603, December.
    5. repec:bre:polcon:45599 is not listed on IDEAS
    6. Harasztosi, Péter & Maurin, Laurent & Pál, Rozália & Revoltella, Debora & van der Wielen, Wouter, 2022. "Firm-level policy support during the crisis: So far, so good?," International Economics, Elsevier, vol. 171(C), pages 30-48.
    7. Bartelsman, Eric & Lopez-Garcia, Paloma & Presidente, Giorgio, 2019. "Labour Reallocation in Recession and Recovery: Evidence for Europe," National Institute Economic Review, National Institute of Economic and Social Research, vol. 247, pages 32-39, February.
    8. Russell W. Cooper & John C. Haltiwanger, 2006. "On the Nature of Capital Adjustment Costs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 611-633.
    9. Buchheim, Lukas & Dovern, Jonas & Krolage, Carla & Link, Sebastian, 2022. "Sentiment and firm behavior during the COVID-19 pandemic," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 186-198.
    10. Lucia Foster & Cheryl Grim & John Haltiwanger, 2016. "Reallocation in the Great Recession: Cleansing or Not?," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 293-331.
    11. Ricardo J. Caballero & Mohamad L. Hammour, 2005. "The Cost of Recessions Revisited: A Reverse-Liquidationist View," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(2), pages 313-341.
    12. Sebnem Kalemli-Ozcan & Bent Sorensen & Carolina Villegas-Sanchez & Vadym Volosovych & Sevcan Yesiltas, 2015. "How to Construct Nationally Representative Firm Level Data from the Orbis Global Database: New Facts and Aggregate Implications," NBER Working Papers 21558, National Bureau of Economic Research, Inc.
    13. Peter N. Gal, 2013. "Measuring Total Factor Productivity at the Firm Level using OECD-ORBIS," OECD Economics Department Working Papers 1049, OECD Publishing.
    14. Buera, Francisco & Fattal Jaef, Roberto & Hopenhayn, Hugo & Neumeyer, Pablo Andrés & Shin, Yongseok, 2021. "The Economic Ripple Effects of COVID-19," CEPR Discussion Papers 16071, C.E.P.R. Discussion Papers.
    15. Kozeniauskas, Nicholas & Moreira, Pedro & Santos, Cezar, 2022. "On the cleansing effect of recessions and government policy: Evidence from Covid-19," European Economic Review, Elsevier, vol. 144(C).
    16. Sørensen, Bent E & Kalemli-Özcan, Sebnem & Volosovych, Vadym & Villegas-Sanchez, Carolina & Yesiltas, Sevcan, 2015. "How to construct nationally representative firm level data from the ORBIS global database," CEPR Discussion Papers 10829, C.E.P.R. Discussion Papers.
    17. Matej Bajgar & Giuseppe Berlingieri & Sara Calligaris & Chiara Criscuolo & Jonathan Timmis, 2020. "Coverage and representativeness of Orbis data," OECD Science, Technology and Industry Working Papers 2020/06, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Meriküll, Jaanika & Paulus, Alari, 2024. "Were jobs saved at the cost of productivity in the COVID-19 crisis?," European Economic Review, Elsevier, vol. 161(C).
    2. Christian Abele & Agnès Bénassy-Quéré & Lionel Fontagné, 2020. "One Size Does Not Fit All: TFP in the Aftermath of Financial Crises in Three European Countries," PSE Working Papers halshs-02883685, HAL.
    3. Anderson, Gareth & Riley, Rebecca & Young, Garry, 2019. "Distressed banks, distorted decisions?," LSE Research Online Documents on Economics 100947, London School of Economics and Political Science, LSE Library.
    4. Mina, Andrea & Santoleri, Pietro, 2021. "The effect of the Great Recession on the employment growth of young vs. small firms in the Eurozone," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 184-194.
    5. Müge Adalet McGowan & Dan Andrews & Valentine Millot, 2017. "Insolvency regimes, zombie firms and capital reallocation," OECD Economics Department Working Papers 1399, OECD Publishing.
    6. Peter Gal & Alexander Hijzen, 2016. "The short-term impact of product market reforms: A cross-country firm-level analysis," OECD Economics Department Working Papers 1311, OECD Publishing.
    7. Pietro Dallari & Nicolas End & Fedor Miryugin & Alexander F. Tieman & Seyed Reza Yousefi, 2020. "Pouring oil on fire: interest deductibility and corporate debt," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(6), pages 1520-1556, December.
    8. Kerstin Hotte & Angelos Theodorakopoulos & Pantelis Koutroumpis, 2021. "Automation and Taxation," Papers 2103.04111, arXiv.org, revised Apr 2022.
    9. Barrero, Jose Maria, 2022. "The micro and macro of managerial beliefs," Journal of Financial Economics, Elsevier, vol. 143(2), pages 640-667.
    10. Nicholas Bloom & Fatih Guvenen & Sergio Salgado, 2016. "Skewed Business Cycles," 2016 Meeting Papers 1621, Society for Economic Dynamics.
    11. Dolores Añón Higón & Juan A. Máñez & María E. Rochina-Barrachina & Amparo Sanchis & Juan A. Sanchis, 2022. "Firms’ distance to the European productivity frontier," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(2), pages 197-228, June.
    12. Villegas-Sanchez, Carolina & Díez, Federico & Fan, Jiayue, 2019. "Global Declining Competition," CEPR Discussion Papers 13696, C.E.P.R. Discussion Papers.
    13. Gareth Anderson & Mr. Mehdi Raissi, 2018. "Corporate Indebtedness and Low Productivity Growth of Italian Firms," IMF Working Papers 2018/033, International Monetary Fund.
    14. Bajgar, Matej & Berlingieri, Giuseppe & Calligaris, Sara & Criscuolo, Chiara & Timmis, Jonathan, 2019. "Industry concentration in Europe and North America," LSE Research Online Documents on Economics 103427, London School of Economics and Political Science, LSE Library.
    15. Criscuolo, Chiara & Andrews, Dan & Gal, Peter N., 2019. "The best versus the rest: divergence across firms during the global productivity slowdown," LSE Research Online Documents on Economics 103405, London School of Economics and Political Science, LSE Library.
    16. Mr. JaeBin Ahn & Mr. Romain A Duval & Can Sever, 2020. "Macroeconomic Policy, Product Market Competition, and Growth: The Intangible Investment Channel," IMF Working Papers 2020/025, International Monetary Fund.
    17. Loredana Fattorini & Mahdi Ghodsi & Armando Rungi, 2020. "Cohesion Policy Meets Heterogeneous Firms," Journal of Common Market Studies, Wiley Blackwell, vol. 58(4), pages 803-817, July.
    18. Cevik, Serhan, 2020. "You are suffocating me: Firm-level analysis of state-owned enterprises and private investment," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 292-301.
    19. Nakatani, Ryota, 2024. "Multifactor productivity growth enhancers across industries and countries: Firm-level evidence," MPRA Paper 120503, University Library of Munich, Germany.
    20. Lenzu, Simone & Manaresi, Francesco, 2018. "Do Marginal Products Differ from User Costs? Micro-Level Evidence from Italian Firms," Working Papers 276, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:163:y:2024:i:c:s0014292123002830. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.