Employment, Output and Productivity Adjustment During the Great Recession: The Role of Managerial Quality

This study investigates empirically how differences in managerial practices shaped the macroeconomic recovery from the 2008 Great Recession. We build a country-industry panel over the 2007-2015 period for eighteen industries in nine OECD countries, using an indicator of management quality at the country level based on the categorical scores of managerial practices collected at the firm level by Bloom et al. (2012) and an indicator measuring the industry level shocks caused by the 2008 economic crisis. We then rely on the local projection method pioneered by Jordà (2005) to estimate the impact of the shocks on post-2009 macro developments at different levels of managerial quality. We find that both production and employment were more resilient in countries where management quality is higher, resulting in no significant cumulative impact of management quality on productivity over the recovery. The effects of management on production and employment resilience are stronger for industries deeply affected by the 2008 crisis and go along with wage moderation and a slight increase in the labour share.