Christoph Albert, Paula Bustos, Jacopo Ponticelli, 26 November 2021

There are still significant gaps in our understanding of how climate change affects economic outcomes. This column uses new data on extreme weather events in Brazil to study their impact on labour and capital reallocation across regions, sectors, and firms. Long periods of excess dryness lead to the reallocation of capital and labour away from affected regions. Excess dryness over the last two decades has also changed the structure of the economy – not only in directly affected areas, but also in regions that were integrated with them via labour and capital markets.

Dan Andrews, Andrew Charlton, Angus Moore, 22 September 2021

Covid-19 has been characterised as a reallocation shock, but the debate has so far lacked a clear link with productivity. This column uses real-time data to show that job reallocation remained connected to firm productivity even while labour turnover fell in response to the pandemic. High (low) productivity firms were more likely to expand (contract), although the strength of this effect varied across countries, consistent with differences in job retention schemes. While policy partly hindered creative destruction, the nature of the pandemic shock favoured high-productivity and tech-savvy firms, resulting in a reallocation of labour to these firms. 

Matthias Kehrig, Nicolas Vincent, 14 November 2020

A decline in the labour share of income has been documented in many countries and industries. This column uses data from US manufacturing establishments to analyse the drivers of this phenomenon. It shows that the massive reallocation of economic activity was driven by establishments that lowered their labour share as they grew in size. Yet, these low labour shares are temporary, making establishments more akin to ‘shooting stars’ than ‘superstars’. Coupled with the fact that their status is associated with higher prices, the evidence points to a significant role for demand-side forces, such as product innovation or brand power. 

Peter Robertson, Longfeng Ye, 11 September 2017

The conventional wisdom is that labour reallocation has been a key driver of China’s growth miracle, and slowing migrant labour flows and rapid wage growth have raised concerns over whether this source of growth has run its course. This column argues that the literature on growth and labour reallocation in China has been dominated by a method that, relative to the now standard growth accounting model, substantially overstates the gains. Allowing for this and for human capital differences across sectors, sectoral labour reallocation has not been a key source of productivity growth in China.

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