This paper examines sectoral productivity shocks of the COVID-19 pandemic, their aggregate impact, and the possible compensatory effects of improving productivity in infrastructure-related sectors. We employ the KLEMS annual dataset for a group of OECD and Latin America and the Caribbean countries, complemented with high-frequency data for 2020. First, we estimate a panel vector autoregression of growth rates in sector level labor productivity to specify the nature and size of sectoral shocks using the historical data. We then run impulse-response simulations of one standard deviation shocks in the sectors that were most affected by COVID 19. We estimate that the pandemic cut economy-wide labor productivity by 4.9 percent in Latin America, and by 3.5 percent for the entire sample. Finally, by modeling the long-run relationship between productivity shocks in the sectors most affected by COVID 19, we find that large productivity improvements in infrastructure--equivalent to at least three times the historical rates of productivity gains--may be needed to fully compensate for the negative productivity losses traceable to COVID 19.

This paper examines sectoral productivity shocks of the COVID-19 pandemic, their aggregate impact, and the possible compensatory effects of improving productivity in infrastructure-related sectors. We employ the KLEMS annual dataset for a group of OECD and Latin America and the Caribbean countries, complemented with high-frequency data for 2020. First, we estimate a panel vector autoregression of growth rates in sector level labor productivity to specify the nature and size of sectoral shocks using the historical data. We then run impulse-response simulations of one standard deviation shocks in the sectors that were most affected by COVID-19. We estimate that the pandemic cut economy-wide labor productivity by 4.9% in Latin America, and by 3.5% for the entire sample. Finally, by modeling the long-run relationship between productivity shocks in the sectors most affected by COVID-19, we find that large productivity improvements in infrastructure—equivalent to at least three times the historical rates of productivity gains—may be needed to fully compensate for the negative productivity losses traceable to COVID-19.

This paper estimates effective carbon rates (ECRs) on carbon dioxide (CO2) emissions from energy use for 18 Latin American and Caribbean (LAC) countries. We follow a methodology developed by the Organization for Economic Co-operation and Development (OECD) as this allows us to compare ECR estimates for LAC countries with those for other countries in other regions. We also adapt the OECD methodology to assess the effect of energy subsidies on ECRs. The results obtained indicate that ECRs were low in LAC countries in 2018. On average, LAC countries priced carbon emissions from energy use at 24 euros per ton of CO2 equivalent (EUR/tCO2e) emissions, while the average pricing in OECD countries was 41 EUR/tCO2e. When considering energy subsidies, the average ECR in LAC falls to 17 EUR/tCO2e. The difference in average carbon pricing observed between LAC and the OECD is, for the most part, explained by lower excise taxes in LAC and, to a lesser extent, to few LAC countries having carbon taxes and the lack of tradable carbon emission permit mechanisms. We also find a large heterogeneity of ECRs across LAC countries as well as across sectors within countries. ECRs are the highest in Costa Rica and the lowest in Ecuador. At the sector level, ECRs are on average the highest in the road transport sector and the lowest in the electricity sector and in the residential and commercial energy use sector. These differences stem mostly from the different taxation of the different energy products. The ECR estimates suggest that countries willing to introduce carbon pricing reforms must pay particular attention to reducing fuel energy subsidies and to increasing ECRs in sectors other than road transport, as these sectors constitute a large share of carbon emissions and are virtually untaxed.

The effects of COVID-19 have been stronger in service-related subsectors, where supply and/or demand were constrained by lockdowns and social distancing measures. The losses in these subsectors have had direct impacts-through their weight in countries GDP-and indirect impacts through their effect on other sectors. In Latin America, effects on the three most affected sectors-wholesale, retail, and hospitality services; construction; and manufacturing-add up to a 4.9 percent hit to economy-wide labor productivity through direct and indirect channels. Large productivity improvements in infrastructure may be needed to fully compensate for the negative productivity losses traceable to COVID-19.

This technical note examines the interactions between infrastructure and productivity growth in Mexico. To address this relation, we follow an approach that seek to tie down infrastructure productivity improvements in terms of the impact of particular types of infrastructure on particular sectors, thus providing the basis for informed decisions on investment priorities for economic growth. We have been able to identify significant relations between labor and capital productivity improvements, or capital deepening (i.e., investment) in infrastructure-related sectors and labor productivity improvements in other sectors. Sectoral infrastructure priorities can be found in the transport and energy sectors, broadly defined, with effects that have regional differences. The nature of our results points to complementary policies and the need to improve the regulatory compact for infrastructure in Mexico. Our results recommend special attention to the regulatory/competition policy approach in transport, and the electricity wholesale market.