A general equilibrium assessment of COVID-19's labor productivity impacts on china's regional economies

Abstract

This study introduces a database for analyzing COVID-19's impacts on China's regional economies. This database contains various sectoral and regional economic outcomes at the weekly and monthly level. In the context of a general equilibrium trade model, we first formulate a mathematical representation of the Chinese regional economy and calibrate the model with China's multi-regional input-output table. We then utilize the monthly provincial and sectoral value-added and national trade series to estimate COVID-19's province-by-month labor-productivity impacts from February 2020 to September 2020. As a year-on-year comparison, relative to February 2019 levels, we find an average 39.5% decrease in labor productivity (equivalent to around 305 million jobs) and an average 25.9% decrease in welfare. Labor productivity and welfare quickly returned to the recent high-growth trends for China in the latter half of 2020. By September 2020, relative to September 2019, average labor productivity increased by 12.2% (equivalent to around 94 million jobs) and average welfare increased by 8.2%.

Keywords: E20; F10; J01; R13.

Fig. 1

Value-added growth rate of China’s manufacturing sectors. Note: See Table 3 for sector descriptions. We only include manufacturing sectors. Based on authors' compilation from China's National Bureau of Statistics and concordance between IO sectors and industrial sectors in the industrial classification for national economic activities in GB/T 4754-2011

Fig. 2

Labor productivity shock estimates in five typical provinces with and without trade shocks (%)

Fig. 3

Labor productivity shock estimates in six regions with and without trade shocks (%). Note: The average labor productivity shock estimates in a region is the average labor productivity shock estimates weighted by 2019 population across provinces

Fig. 4

Scatter plot of labor productivity shock estimates and ratio of cumulative confirmed cases to population, 2020. Note: We base the ratio of confirmed cases to population on 2019 population. Data on cumulative confirmed cases come from China's Center for Disease Control and Prevention (China CDC). Labor productivity shock estimates are estimated with trade shocks as additional targets. For clear illustration, we exclude Hubei from the figure due to its ratio of confirmed cases to population

Fig. 5

Welfare changes in five typical provinces with and without trade shocks (%)

Fig. 6

Welfare changes in six regions with and without trade shocks (%). Note: The average labor productivity shock in a region is the average labor productivity shock weighted by 2019 population across provinces

Fig. 7

Labor productivity shocks in February, June, and September 2020 (%). Note: There are no data for Tibet, Hong Kong, Macau, and Taiwan

Fig. 8

China’s provinces and regional classifications