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

Author

Listed:
  • Dan Andrews
  • Elif Bahar
  • Jonathan Hambur

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.

Suggested Citation

  • Dan Andrews & Elif Bahar & Jonathan Hambur, 2023. "The Effects of COVID-19 and JobKeeper on Productivity-Enhancing Reallocation in Australia," CAMA Working Papers 2023-29, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2023-29
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2023-07/29_2023_andrews_bahar_hambur.pdf
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    More about this item

    Keywords

    COVID-19; productivity; reallocation; recessions;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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