Economic adjustment during the Great Recession: The role of managerial quality
Gilbert Cette, Jimmy Lopez, Jacques Mairesse & Giuseppe Nicoletti
#2020-048
This study investigates empirically how managerial practices have
affected macroeconomic adjustment during the Great Recession after the
2008 economic crisis. We start by constructing a country*industry
balanced panel data over the 2007-2015 period for eighteen industries in
ten OECD countries, and complementing it by two indicators: an indicator
of management quality at the country level based on the managerial
practices categorical scores at firm level from Bloom et al. (2012); and
an indicator at the industry level for the shocks stemming from the 2008
economic crisis. We then rely on the local projection method pioneered
by Jorda (2005) to estimate the direct impacts of country management
quality indicators and industry economic shocks as well as their joint
impacts, on five variables of interest: value-added, employment, labour
productivity, wage per employee and labour share during the Great
Recession. We find that, in countries where management quality is
higher, production and employment are more resilient during the Great
Recession, with less production losses and employment damages, no
effects on productivity, wage moderation and a slight increase in the
labour shares. It appears, moreover, that this resilience is increasing
with the size of industry shocks.
Keywords: Economic adjustment, Employment, Wage, Management quality,
Great Recession, Local projection cross-country analysis, Dynamic
modelling
JEL classification: E24, M11, M54