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©2023 International Monetary Fund
SDN/2023/003
IMF Staff Discussion Notes
Research Department
Digitalization during the COVID-19 Crisis: Implications for Productivity and Labor Markets in Advanced Economies
Prepared by Florence Jaumotte, Longji Li, Andrea Medici, Myrto Oikonomou, Carlo Pizzinelli, Ippei Shibata, Jiaming Soh, and Marina M. Tavares1
Authorized for distribution by Pierre-Olivier Gourinchas
March 2023
IMF Staff Discussion Notes (SDNs) showcase policy-related analysis and research being developed by IMF staff members and are published to elicit comments and to encourage debate. The views expressed in Staff Discussion Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT:
Digitalization induced by the pandemic was seen both as a possible silver lining to the crisis that could increase longer-term productivity and a risk for further labor market inequality between digital and non-digital workers. This note shows that the pandemic accelerated digitalization and triggered a partial catch-up by less digitalized entities in advanced economies. Higher digitalization levels substantially shielded productivity and hours worked during the crisis. However, the extent to which pandemic-induced digitalization led to structural change in the economy is less clear. Less digitalized sectors have rebounded more strongly, albeit after stronger declines, and while workers in digital occupations were more shielded from the crisis, there does not appear to be a structural change in the composition of labor demand. Meanwhile, shifts in labor supply are more likely to be permanent, driven by the increase in working from home.
RECOMMENDED CITATION: Jaumotte and others. 2023. Digitalization during the Covid-19 Crisis: Implications for Productivity and Labor Markets in Advanced Economies. Staff Discussion Note SDN2023/003. International Monetary Fund, Washington DC.
| ISBN: | 979–8-40023–2596 |
| JEL Classification Numbers: | J22, J23, J24, O33, O47, E24 |
| Keywords: | Digitalization, COVID-19, labor market, productivity |
| Author’s E-Mail Address: | FJaumotte@imf.org; LLi4@imf.org; AMedici@imf.org; MOikonomou@imf.org; CPizzinelli@imf.org; IShibata@ifmf.org; JSoh@imf.org; MMendestavares@imf.org. |
| ISBN: | 979–8-40023–2596 |
| JEL Classification Numbers: | J22, J23, J24, O33, O47, E24 |
| Keywords: | Digitalization, COVID-19, labor market, productivity |
| Author’s E-Mail Address: | FJaumotte@imf.org; LLi4@imf.org; AMedici@imf.org; MOikonomou@imf.org; CPizzinelli@imf.org; IShibata@ifmf.org; JSoh@imf.org; MMendestavares@imf.org. |
Contents
Executive Summary
I. Introduction
II. Stylized Facts
III. Productivity
III.1 Digitalization and Labor Productivity
III.2 Digitalization and Firm Total Factor Productivity
IV. Labor Markets
IV.1 Digitalization and Sectoral Employment
IV.2 Digital Occupations
IV.3 The Impact of COVID-19 on Digital Labor Demand
IV.4 The Effects of Digitalization on Labor Supply
V. Policy Recommendations
VI. Conclusion
BOXES
Box 1. Alternative Measures of Digitalization
Box 2. Measuring the Evolution of Digital Skills Using Data from LinkedIn
FIGURES
Figure 1. Labor Productivity and Labor Market Tightness
Figure 2. Covid-19 Has Accelerated Digitalization in Advanced European Countries
Figure 3. Digital Intensity Increased in the US
Figure 4. Covid-19 Has Impacted Negatively Labor Productivity
Figure 5. Regression Results on Labor Productivity
Figure 6. Evolution of Firms’ Total Factor Productivity
Figure 7. Firms’ ICT Intensity Has Increased Since 2019
Figure 8. Regression Results on Total Hours Worked
Figure 9. Digital Occupations
Figure 10. Regression Analysis of the Effect of Covid-19 on Employment in Digital an non-Digital Occupations
Figure 11. Share of Vacancies in Digital Occupations in Advanced Economies
Figure 12. Regression Analysis of Covid-19 Exposure and Vacancies for Digital Occupations
Figure 13. Trends in Working from Home
Figure 14. Working from Home and Labor Force Attachment
Figure 15. The Labor Supply Implications of Working from Home
Figure 16. The Role of Policies on Digitalization
REFERENCE
ANNEXES
Annex 1. Data Sources, Sample Coverage, and Variable Definitions
Annex 2. Digital Intensity Decomposition
Annex 3. Productivity Regression Analysis
Annex 4. Employment Regression Analysis
Annex 5. Vacancies Regression Analysis
Annex 6. Working From Home
Annex 7. Box A1
The authors thank Alimata Kini Kaboré for editorial assistance; Romain Duval, Pierre-Olivier Gourinchas, and Antonio Spilimbergo for their helpful comments and guidance; Grace B. Li for her insights and generously sharing European Department country-survey data on Recovery and Resilience Facility grant proposals; and Yi Ji for her research assistant support at the beginning of the project . The authors also gratefully acknowledge support from LinkedIn in making their data available for this Staff Discussion Note. Data were obtained through the Development Data Partnership (datapartnership.org), a collaboration between international organizations and private sector companies to facilitate the efficient and responsible use of third-party data in international development.