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The large regional variation in minimum wage levels during the period 2002–8 in China implies that Chinese manufacturing firms experienced competitive shocks as a function of firm location and their low-wage employment share. We find that minimum wage hikes accelerate the input substitution from labour to capital, reduce employment growth and accelerate total factor productivity growth—particularly among the less productive firms under private Chinese or foreign ownership, but not among state-owned enterprises. The heterogeneous firm response to labour cost shocks can be explained by differences in management practices and suggests that management quality and competitive pressure are complementary.

This paper estimates a structural dynamic equilibrium model of the Brazilian labor market in order to study trade-induced transitional dynamics. The model features a multi-sector economy with overlapping generations, heterogeneous workers, endogenous accumulation of sector-specific experience, and costly switching of sectors. The model's estimates yield median costs of mobility ranging from 1.4 to 2.7 times annual average wages, but a high dispersion of these costs across the population. In addition, sector-specific experience is imperfectly transferable across sectors, leading to additional barriers to mobility. Using the estimated model for counterfactual trade liberalization experiments, the main findings are: (1) there is a large labor market response following trade liberalization but the transition may take several years; (2) potential aggregate welfare gains are significantly reduced due to the delayed adjustment; (3) trade-induced welfare effects depend on initial sector of employment and on worker demographics such as age and education. The experiments also highlight the sensitivity of the transitional dynamics with respect to assumptions regarding the mobility of capital.

After defining the concept of resilience and its application to the regional context, the paper presents a preliminary evaluation of regional economic resilience in the case of the Italian regions. In doing so, we follow the approach by Martin (J Econ Geogr 12:1–32, 2012) and Martin and Sunley (2015) who identify three different dimensions to regional economic resilience: (a) resistance, i.e., the degree of sensitivity or depth of reaction of a regional economy to a recessionary shock; (b) recovery, i.e., the speed and magnitude of the recovery; (c) reorientation and renewal, i.e., the ability of a region to adapt in response to the shock and renew its growth path. The analysis is conducted at the local labor systems (LLS) geographical level and focuses, at this stage, only on the first two dimensions of resilience, i.e., resistance and recovery. The recessionary shock (2009–2010) is defined following the Italian National Statistical Institute approach for which a recession implies a decrease in GDP for three consecutive trimesters. The pre-recessionary period is 2007–2008 and the recovery period 2011 (as a new recession started again in Italy at the end of 2011). The results clearly point at very heterogeneous resilience for the Italian LLS.

The resources sunk in zombie firms have risen over the last two decades, hampering productivity growth in developed economies. In this paper, we examine the recovery and exit of zombie firms among small- and medium-sized enterprises (SME), as well as the determinants of these transitions. To our knowledge, this is the first study on the determinants of the probability of a zombie recovering or exiting in a European context. The study also contributes to the discussion of the definition of zombie firms. Based on a panel of Portuguese manufacturing and services firms covering the 2004–2017 period, we do find a widespread presence of zombies. As expected, they are relatively less productive than non-zombies, while the probability of transition into recovery and exit is relatively low, which we interpret as evidence in favour of the presence of high barriers to firm mobility. In turn, the regression results show that downsizing and restructuring, as well as debt restructuring, are crucial in enhancing recovery of zombie firms. These are non-trivial results from the perspective of managers and policy makers. We performed several exercises using alternative definitions of zombie firms and estimation techniques and found that our findings are robust.Plain English Summary A 1% decline in the share of highly indebted and unprofitable firms (i.e. zombies) is estimated to increase the average labour productivity by 3.1 percent. Recovery of zombies in particular can be enhanced by downsizing and restructuring. Based on a very large panel of Portuguese small- and medium-sized manufacturing and services firms, covering the 2004–2017 period, we do find a widespread presence of zombie firms. Moreover, the chance of these firms to recover or exit is relatively low, an evidence of the presence of high barriers to firm mobility and resource misallocation. Our results have important managerial and policy implications: (1) a coordinated and holistic restructuring strategy (technological, operational and debt-related) is crucial to increase the likelihood of recovery of weak companies; (2) governments should formulate an adequate institutional framework in order to strengthen the selection of zombie firms, namely by designing more reallocation-friendly insolvency regimes and discouraging creditors to refinance unviable firms.

We estimate the impulse response function (IRF) of GDP to a banking crisis using an extension of the local projections method. We demonstrate that, though robust to misspecifications of the data-generating process, this method suffers from a hitherto unnoticed bias which increases with the forecast horizon. We propose a correction to this bias and show through simulations that it works well. Applying our corrected local projections estimator to the data from a panel of 99 countries observed between 1974 and 2001, we find that an average banking crisis yields a GDP loss of just under 10% in 10 years, with little sign of recovery. Like the original local projections method, our extension of it is widely applicable.

The ever tighter coupling of our food, water and energy systems, in the context of a changing climate is leading to increasing turbulence in the world. As a consequence, it becomes ever more crucial to develop cities, regions, and economies with resilience in mind. Because of their global reach, substantial resources, and information-driven leadership structures, multinational corporations can play a major, constructive role in improving our understanding and design of resilient systems. This volume is the product of the Resilience Action Initiative, a collaboration among Dow, DuPont, IBM, McKinsey & Co., Shell, Siemens, Swiss Re, Unilever, and Yara designed to explore possible corporate contributions to global resilience, especially at the nexus of water, food and energy. Aggressively forward-thinking, and consistent with an enlightened self-interest, the ideas considered here represent a corporate perspective on the broad collaborations required for a more resilient world.

Uncertainty appears to jump up after major shocks like the Cuban Missile crisis, the assassination of JFK, the OPEC I oil-price shock, and the 9/11 terrorist attacks. This paper offers a structural framework to analyze the impact of these uncertainty shocks. I build a model with a time-varying second moment, which is numerically solved and estimated using firm-level data. The parameterized model is then used to simulate a macro uncertainty shock, which produces a rapid drop and rebound in aggregate output and employment. This occurs because higher uncertainty causes firms to temporarily pause their investment and hiring. Productivity growth also falls because this pause in activity freezes reallocation across units. In the medium term the increased volatility from the shock induces an overshoot in output, employment, and productivity. Thus, uncertainty shocks generate short sharp recessions and recoveries. This simulated impact of an uncertainty shock is compared to vector autoregression estimations on actual data, showing a good match in both magnitude and timing. The paper also jointly estimates labor and capital adjustment costs (both convex and nonconvex). Ignoring capital adjustment costs is shown to lead to substantial bias, while ignoring labor adjustment costs does not.

Abstract The COVID-19 pandemic is ripping around most of the world, but not in Africa; at least, not yet. At the same time, the policy response is remarkably uniform: most of sub-Saharan Africa went into lockdown from the second week in March. What happens next for the pandemic across Africa is uncertain, but the March lockdowns are unlikely to have contained the epidemic by themselves. What is clear is that the combination of domestic lockdowns and the spill-over from the global recession means immediate and severe hardship. This paper looks beyond the public health aspects of the pandemic to examine the medium-term macroeconomic adjustment challenge confronting domestic policy-makers and international donors. We combine epidemiological and macroeconomic models to calibrate the scale of the combined shock to a representative low-income African economy and to show how alternative policy options for slowing transmission of COVID-19 impact on public revenue, and on GDP in the short run, and hence shape the path to recovery. Noting that the first lockdown, however costly, does not by itself eliminate the likelihood of a re-emergence of the epidemic, we then frame the agenda for key macroeconomic and public finance policies to sustain recovery, growth, and poverty reduction in sub-Saharan Africa. The initial hit to consumption will be up to one-third. All the public policy options are grim. International donor finance of US$40–50 billion, together with domestic reform to accelerate recovery, would make a significant difference to the outlook for poverty.

The 2008 recession has had a prolonged and varying effect both across and within countries. This paper studies the crisis impact on Great Britain’s Local Authority Districts (LADs) using the concept of economic resilience. This country is an interesting case study as the impact varied significantly among LADs. The focus is on employment, and a new method is proposed for comparing pre- and post-recession conditions in order to assess the recession impact. The influence of a number of determining factors is examined, and the study finds a significant effect for initial economic conditions, human capital, age structure, urbanisation and geography. Policy makers need to take into account subnational differences in these factors in order to design and implement better targeted policies.