Strengthening Economic Resilience Following the COVID-19 Crisis A FIRM AND INDUSTRY PERSPECTIVE Strengthening Economic Resilience Following the COVID‑19 Crisis A FIRM AND INDUSTRY PERSPECTIVE This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. Please cite this publication as: OECD (2021), Strengthening Economic Resilience Following the COVID-19 Crisis: A Firm and Industry Perspective, OECD Publishing, Paris, https://doi.org/10.1787/2a7081d8-en. ISBN 978-92-64-70595-1 (print) ISBN 978-92-64-36285-7 (pdf) Photo credits: Cover © Raphael Whittle, DesignRaphael Ltd. Corrigenda to publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm. © OECD 2021 The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at http://www.oecd.org/termsandconditions. FOREWORD  3 Foreword This publication, Strengthening Economic Resilience Following the COVID-19 Crisis: A Firm and Industry Perspective, adds a new and unique contribution to the OECD’s extensive body of work on the COVID-19 crisis and resilience. It aims to identify the factors that determine the impact of economic shocks and crises – like the COVID-19 pandemic – on economies, by looking at firm and industry data that illustrate trends beyond the aggregate, economy-wide level. The work presents several topical chapters to identify areas of vulnerability across countries, industries, firms and workers to better understand what issues might be the most pressing to address for a strong recovery and future resilience. The impacts of the crisis on the business sector are heterogeneous and multidimensional, making it crucial to analyse and understand which factors and channels can mitigate or exacerbate the effects of shocks. This publication looks at industry characteristics, business dynamics, digital transformation, international connectedness and inclusion across groups of workers, to identify possible ways to achieve greater resilience and successfully navigate the world’s pressing economic and social issues. This starts with a strong and inclusive recovery, but the report also pays special attention to ways this period can be harnessed to achieve long-term progress towards the green and digital transformations. Perhaps most importantly, this publication aims to act as a source of evidence and inspiration for policy makers. Building resilience into economies – and coming back stronger from periods of crisis – are attainable goals that can be achieved through the design and implementation of well co-ordinated, evidence-based policy. The analysis and recommendations presented in this publication are intended to aid policy makers in this goal. The OECD Committee on Industry, Innovation and Entrepreneurship (CIIE) declassified the contents of Strengthening Economic Resilience Following the COVID-19 Crisis: A Firm and Industry Perspective as follows, by written procedure: Chapter 1 on 6 July 2021; Chapter 2 and Annexes A to D on 2 July 2021; Chapter 3 on 26 May 2021; Chapter 4 on 21 May 2021; Chapter 5 on 14 June 2021; Chapter 6 on 29 June 2021; and Chapter 7 on 18 May 2021. The OECD Secretariat prepared the report for publication. STRENGTHENING ECONOMIC RESILIENCE FOLLOWING THE COVID-19 CRISIS © OECD 2021 ACKNOWLEDGEMENTS  5 Acknowledgements This publication, Strengthening Economic Resilience Following the COVID-19 Crisis: A Firm and Industry Perspective, has been produced by the Productivity, Innovation and Entrepreneurship (PIE) Division of the OECD Directorate of Science, Technology and Innovation (STI). It has been guided by the leadership of Chiara Criscuolo, Head of Division, alongside Andrew Wyckoff and Dirk Pilat, the Director and Deputy Director of STI. This report is the result of the collective effort of dozens of people within and outside of the Division, whom we wish to thank profusely for their work, inputs and dedication. The publication was written and prepared by Nathalie Scholl, Alana Christensen Baker, Chiara Criscuolo and Isabelle Desnoyers-James. The authors are very grateful to Márcio Carvalho, who provided indispensable support throughout the process. In addition to the above team, specialist authors worked extensively on contributions to the topical chapters of this publication. Its comprehensive scope would not have been possible without the work and analysis of these OECD PIE experts, particularly Leonidas Aristodemou, Sara Calligaris, Flavio Calvino, Antoine Dechezleprêtre, Milenko Fadic, Nicolas Gonne, Joaquim Guilhoto, Alexander Himbert, Peter Horvát, Kohei Kitazawa, Clara Kögel, Guy Lalanne, Francesco Manaresi, Lea Samek, Lynda Sanderson, Mariagrazia Squicciarini, Rudy Verlhac, Colin Webb and Nori Yamano, as well as Peter Gal and Timo Leidecker from the OECD Global Forum on Productivity. Colleagues across other OECD Directorates and Divisions also generously gave their time to review and guide content, including from the Economics Department; the Directorate for Employment, Labour and Social Affairs; the Trade and Agriculture Directorate; and the Digital Economy Policy Division within STI. Delegates from the CIIE and its Working Party on Industry Analysis (WPIA) also provided valuable feedback to the publication throughout the process, including during Committee and Working Party meetings and through webinars, which we are very grateful for. All chapters were reviewed by Sarah Box, Dirk Pilat and Andrew Wyckoff of STI, whose direction, inputs, and feedback were invaluable. The publication also owes much to Jennifer Lee, for administrative support through the various stages of the process. Angela Gosmann assisted greatly in the publication stage. STRENGTHENING ECONOMIC RESILIENCE FOLLOWING THE COVID-19 CRISIS © OECD 2021 TABLE OF CONTENTS  7 Table of contents Foreword 3 Acknowledgements 5 Acronyms, abbreviations and units of measure 11 Executive summary 13 1 Economic resilience during crisis: Opportunities and challenges from COVID-19 15 Introduction 16 What made the difference? A summary of factors affecting resilience during COVID-19 17 Policy recommendations 20 Looking forward 23 References 26 Notes 26 2 Context of the crisis 27 Introduction 28 Containment measures in response to COVID-19 29 Support measures in response to containment responses 32 Economic consequences 34 References 38 Notes 40 3 Resilience across industries 43 Introduction 44 Ability to produce and supply in the short run 45 Indirect demand implications 53 Liquidity and credit constraints 55 Conclusions and policy implications 57 References 59 Notes 61 4 Business dynamics and financial vulnerabilities 63 Introduction 64 Initial impacts of the COVID-19 pandemic on firm entry and bankruptcies 65 Business dynamics 73 Corporate financial vulnerability 80 Conclusions and policy implications 82 References 84 STRENGTHENING ECONOMIC RESILIENCE FOLLOWING THE COVID-19 CRISIS © OECD 2021 8  TABLE OF CONTENTS Notes 87 5 Supporting productivity through digital technologies 89 Introduction 90 Adoption of telework 92 E-commerce and the pre-existing use of digital tools 99 Productivity during COVID-19 and beyond 103 Conclusions and policy implications 107 References 110 Notes 113 6 Industrial and international connectedness 115 Introduction 116 Global value chain exposure and centrality 117 Industry composition and the structure of demand 121 Air transport 123 Tourism 125 Conclusions and policy implications 128 References 130 Notes 132 7 Inclusiveness across gender and skill groups 133 Introduction 134 Gender differences in exposure to employment effects 135 Skills and education differences in exposure to employment effects 141 Conclusion and policy implications 144 References 146 Notes 148 Annex A. Industry dashboard 151 Essential industries 153 Non-essential, high telework potential 156 Non-essential, low telework potential 158 References 160 Notes 160 Annex B. Industry composition by country 161 Reference 166 Annex C. Industry classification 167 Annex D. Examples of government support measures 169 Pre-existing government schemes to support workers 170 Policies enacted to support firms 171 References 174 Notes 175 Tables Table A A.1. Overview of indicators, by affected dimensions 151 STRENGTHENING ECONOMIC RESILIENCE FOLLOWING THE COVID-19 CRISIS © OECD 2021