OECD economies face uneven productivity recovery after COVID-19 crisis

A new analysis published in Econometrics reveals how the COVID-19 pandemic reshaped productivity and efficiency across 37 OECD countries. The findings highlight sharp divergences in national recovery paths and underscore the importance of policy design, technological adaptation, and institutional resilience in determining long-term economic outcomes.

Titled "Beyond GDP: COVID-19’s Effects on Macroeconomic Efficiency and Productivity Dynamics in OECD Countries", the study applies advanced data analysis to evaluate how countries performed before, during, and after the pandemic. By integrating both desirable outputs, such as GDP, and undesirable factors, including unemployment, inflation, housing market volatility, and interest rate instability, the research delivers a nuanced assessment of economic performance that moves beyond traditional growth metrics.

How did productivity and efficiency evolve across the pandemic phases?

The study divides productivity dynamics across three distinct periods: pre-pandemic (2018–2020), during-pandemic (2020–2022), and post-pandemic (2022–2024). Using a Slack-Based Measure Data Envelopment Analysis (SBM-DEA) and the Malmquist Productivity Index (MPI), total factor productivity (TFP) was decomposed into efficiency change (EC) and technological change (TC), revealing how countries adapted under crisis.

During the pre-pandemic period, most OECD nations demonstrated stable productivity growth, supported by strong institutional environments, steady capital investment, and balanced macroeconomic fundamentals. Eastern European economies benefited from EU-driven reforms, while emerging markets like Colombia experienced more volatile growth patterns due to external shocks and structural transitions.

The pandemic period introduced disruptions that affected efficiency more than technology. Countries with strong digital infrastructure, such as South Korea and Sweden, maintained resilience, leveraging innovation and adaptability to counter economic shocks. However, economies reliant on tourism and traditional service sectors, including Costa Rica and Czechia, saw declines in productivity as lockdowns and supply chain disruptions weighed heavily on output. Interestingly, while efficiency deteriorated in many cases, technological change remained relatively robust, indicating that innovation and digital transformation advanced even amid widespread economic distress.

Post-pandemic results showed broad productivity improvements, but with strikingly uneven outcomes. Japan and Colombia recorded some of the strongest rebounds, suggesting successful adaptation and recovery strategies. In contrast, Costa Rica, Lithuania, and Estonia struggled with persistent inefficiencies, reflecting underlying structural weaknesses. Mature economies like the United States and Germany achieved only modest gains, consistent with their slower-moving innovation dynamics.

What role did technology and efficiency play in recovery?

The research explores whether post-pandemic growth was driven more by catching up to existing best practices (efficiency change) or by shifts in the technological frontier (technological change). The findings reveal that technological change played a dominant role across all phases, particularly during the pandemic when innovation allowed some economies to sustain growth despite disruptions.

Efficiency change, on the other hand, varied widely. Countries that rapidly optimized resource use and adapted operationally, such as Japan in the later stages, achieved strong catch-up effects. Meanwhile, nations with structural rigidities or inconsistent policy measures experienced stagnation or even regression in efficiency. For example, Sweden and Switzerland, despite strong institutions, saw sharp fluctuations in efficiency during the crisis, reflecting uneven adaptation to rapidly changing conditions.

This decomposition offers crucial insights for policymakers: while innovation and technology investments are essential, they must be complemented by policies that enhance operational efficiency to ensure sustainable growth. The findings suggest that even advanced economies can fall behind if they fail to optimize the use of available resources, especially during periods of economic stress.

How did government policy shape post-COVID productivity?

The study also investigates the impact of government responses, particularly the stringency of lockdown measures, on long-term productivity outcomes. By linking government policy data from the Oxford COVID-19 Government Response Tracker with post-pandemic productivity results, the research identifies clear patterns.

Strict lockdowns implemented in 2020 were associated with lower productivity levels in the later recovery period of 2023–2024. These measures, while necessary for public health, had long-lasting economic costs in countries where recovery strategies were slow or poorly coordinated. Conversely, adaptive policies in 2021, characterized by targeted interventions, digitalization efforts, and supply chain diversification, contributed to sustained technological progress and stronger long-term growth.

The study stresses that economic resilience during crises depends not only on the severity of policy measures but also on their flexibility and ability to promote innovation. Policymakers are urged to design responses that minimize disruptions while fostering digital transformation, structural reforms, and sustainable investments.

Governments must focus on innovation-friendly reforms, strengthen digital infrastructure, and invest in long-term resilience strategies. Additionally, the integration of forward-looking economic policies can mitigate the adverse effects of future shocks and support sustainable growth.