Dan Andrews, Andrew Charlton, Angus Moore

In typical recessions, less productive firms shrink by more than their more productive counterparts. This “cleansing” process of recessions reallocates jobs from less- to more-productive firms, in the process improving aggregate productivity. This project uses data on hundreds of thousands of small businesses in Australia, New Zealand, and the United Kingdom to look at whether this reallocation occurred during COVID. This is important, because COVID was not a typical recession. Firms were forced to close uniformly, regardless of their productivity.