Recent research that I co-authored shows that the pandemic has prompted an increasing number of rich-country firms to reduce their reliance on global supply chains and invest more in robots at home.
Since the mid-2000s, productivity growth in advanced economies has been anaemic. Average annual productivity growth in the United States from 2005 to 2016 was just 1.3%, less than half of the 2.8% annual growth rate recorded between 1995 and 2004. Across other OECD countries, annual productivity growth declined from 2.3% in the 1995–2004 period to 1.1% between 2005 and 2015.
This sluggish growth appears paradoxical, given recent rapid advances in digital innovation and AI. As Erik Brynjolfsson, Daniel Rock, and Chad Syverson have noted, “We see transformative new technologies everywhere but in the productivity statistics.” But might the Covid-19 pandemic help to resolve the paradox by accelerating firms’ adoption of robots and other labour-saving innovations, thereby boosting productivity growth?
