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The impact of Covid-19 on productivity

Author

Listed:
  • Bloom, Nicholas

    () (Stanford University)

  • Bunn, Philip

    () (Bank of England)

  • Mizen, Paul

    () (University of Nottingham)

  • Smietanka, Pawel

    () (Bank of England)

  • Thwaites, Gregory

    () (University of Nottingham)

Abstract

We analyse the impact of Covid-19 on productivity in the United Kingdom using data derived from a large monthly firm panel survey. Our estimates suggest that Covid-19 will reduce TFP in the private sector by up to 5% in 2020 Q4, falling back to a 1% reduction in the medium term. Firms anticipate a large reduction in ‘within-firm’ productivity, primarily because measures to contain Covid-19 are expected to increase intermediate costs. The negative ‘within-firm’ effect is partially offset by a positive ‘between-firm’ effect as low productivity sectors, and the least productive firms among them, are disproportionately affected by Covid-19 and consequently make a smaller contribution to the economy. In the longer run, productivity growth is likely to be reduced by diminished R&D expenditure and diverted CEOs’ time spent on dealing with the pandemic.

Suggested Citation

  • Bloom, Nicholas & Bunn, Philip & Mizen, Paul & Smietanka, Pawel & Thwaites, Gregory, 2020. "The impact of Covid-19 on productivity," Bank of England working papers 900, Bank of England.
    • Handle: RePEc:boe:boeewp:0900
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Productivity; reallocation; Covid-19; growth;

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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