 and welcome today to of the forum. Thanks a lot for joining us. Yesterday we found out plenty about the corporate debt overhang and investigated how shifts in inflationary pressures are affecting the outlook. Today you can expect to hear more about how businesses are being affected by the pandemic, as well as how monetary policy is being affected by climate change and also inequality. We shall also announce the winner of the Young Economist competition. Just as a reminder, we'd very much welcome questions from you, the participants. In order to ask them, please raise your hand via Zoom. We are living through an era of vast change. The pandemic has fundamentally altered the way most of us work and widen the gulf between the economy's winners and losers. This next panel will investigate how different parts of the economy have been affected. I'd now like to introduce our session chair, the European Central Bank's Vice President, Louis de Gindos. Mr. de Gindos, the floor is yours. Thank you very much, Glur. Thank you very much, Glur. Good afternoon, everyone. It's a great pleasure to welcome Professor Chiara Crisquolo at the start of this second day in our forum. This is going to be the first session of the second day. Our second day, as Glur has indicated, is going to be dedicated to structural changes, shaping future economic developments, and our first paper focuses on the way in which the pandemic, COVID-19 pandemic, has affected productivity and business dynamics across the euro area. Chiara Crisquolo is head of the Productivity, Innovation, and Entrepreneurship Division of the OECD and has conducted extremely relevant research on these very topics, greatly advancing the use of firm level micro data. She will present her paper on productivity and business dynamics through the lens of COVID-19. Her work has a country-specific dimension, and it can shed light on questions such as, which changes are likely to persist and which aspects will return to the state of school? And second, whether the move into more digitalization by widening productivity gaps could increase divergences across countries in line with the industrial structure. Chiara, you have the floor. You know, it's home housekeeping recommendations. You have 20 minutes. And afterwards, we'll have Professor John von Rinnen that will be your discussion. Chiara, you have the floor. Welcome. Thank you very much, Mr. Chair, and good afternoon to everyone. Let me start by thanking the organizers for inviting me. It's a great honor to be here with you today even if only virtually. Let me start by saying that mentioning the president of the ECB, Christine Lagarde, who remarked in her opening speech yesterday that the COVID-19 has been a recession like no other. And indeed, what I'm going to show you in the next 20 minutes and what I've tried to show in the paper is that the COVID-19 has significantly affected productivity and business dynamics in the short term and it has the potential of significantly affecting productivity and business dynamics in the medium to long run. In the presentation, I will focus on the channels and in particular on four channels that might have affected productivity and business dynamics during the crisis. And I will start looking at the first, is at the real location between businesses that has come with the crisis, not only across sectors, but also within sectors, focusing also on the process of creative destruction. So entry and exit that was already mentioned yesterday in the session led by Professor Imasina. But the COVID-19 has also been a significant change for businesses. Businesses to survive had to adopt digital technology, had to use telework practices. And the complementarity of these digital adoption and telework with intangible assets will have potentially long-term effects for productivity, business dynamics, but also inequality and concentration. Before I move on and go into detail, let me mention, let me note two issues. The first one is that one of the challenges I faced while doing the paper is really the scarcity of timely and granular data that is comparable across country with some notable exception, in particular at the safe survey of DCP and the surveys led by DAB. So some of the evidence will really rely also on country-specific evidence. The second big caveat is I think everyone knows we are still not out of the woods yet. So we're very much still in the crisis and therefore it's still early days to really be able to clearly distinguish between what is a cyclical pattern to what is a structural change. So this needs to be kept in mind when interpreting some of the results. With these two caveat in mind, let me move to the first channel, the cross-sector allocation. It's no surprise that COVID while affecting all businesses has very much been a sectoral shock with sectors that depended more on face-to-face interaction with customers being affected more. To show this, let me describe the graph reported on the slide where we rank businesses according to the level of labor productivity before the crisis. And if you focus on the white diamonds on the graph, you see very clearly that the sectors that have been most affected are the ones that have also the lowest productivity. So it seems that there is a sort of pecking order in the strength of the shock, which might actually explain a productivity enhancing relocation that was not present, for example, in previous recession and in particular in the global financial crisis. This might appear as good news, but actually this increase in productivity which in the Euro area amounted to 1.5% increase in 2020 actually came with a distraction in output. So we have seen a 6.3% decline in output that really reflect the shrinking of the sector and this hasn't been really matched with an increase in output in the high productivity sector. So this is actually bad news. The second big question in the headwind, I would say, is this might not belong a long-term enhancement of productivity and evidence from the UK already suggests that there is a fading out of this productivity enhancing role of relocation or sectoral relocation already at the beginning of 2021. So how much of these will stay will actually depend on the long-term change in consumer behavior. Finally, even if these were to stay, there are significant costs to cross-sector relocations coming from, for example, skill mismatch and frictions such as frictional unemployment. So again, this is a sign and I would say a push for an important role for policy in particular skill policy if this continues. Let me now go to what has probably been the most striking and the most peculiar feature of the COVID-19 crisis, which has been an unaccepted decline in bankruptcy. This was discussed at length yesterday in Professor Ivashina's talk, but what I wanted to show is that both in the Euro area but in the UK also, there has been a strong decline in bankruptcy probably reflecting the effectiveness of the sizeable support measures in place, but also the regulatory measures that were put in place also at the very beginning of the COVID crisis that actually delayed bankruptcies. The other side of the coin, when we think about creative destruction is entry. Entry actually presents a bit more of a heterogeneous pattern within the Euro area. So let me start with what we see outside the Euro area, very strong V-shaped recovery in the US and the United Kingdom, mainly pushed by the increase in entry rates in online retail and also some positive outlook with entry rates going back to the levels pre-crisis if not higher, for example, in the case of France for most of the Euro area countries, but with two, I would say, significant exceptions, Italy and Portugal. This is where, these are countries where entry rates are still lower relative to pre-COVID crisis level and this might raise concern about continuing declining business dynamics that we have seen over the last decades in the US but also across Europe and in particular the potential consequences of a missing generation of firm, something that we had already seen after the global financial crisis. Perhaps a big question that it's important to ask ourselves and to answer is whether the relocation that we, as I said, has been slowed down or delayed has been distorted or not. So one potential mechanism that might make the relocation during this crisis distorted is the fact that, as I said, the shock has been very much a sectoral one and so it might have affected all firms independent of whether they were profitable or productive before the crisis because of the significant liquidity shortfall that they may have faced. Secondly, we also mentioned the support measures which for sure saved job matches and made this recovery much smoother than we may have expected. But they have also potentially, they may have also slowed down and distorted relocation process. Now, the evidence from countries such as France suggests that this has not been the case. In particular, recent study by Cross and Coase or suggest that if anything, the support of the government has absorbed the sectoral nature of the shock and evidence that was mentioned yesterday from the Comité Carré also suggests that the support measure didn't disproportionately go to businesses that could have been already considered zombie before the crisis. So the risk of zombification doesn't seem to be there and similar studies from other countries, the UK, US, Australia seem to point to a similar direction. That said, I think it's important to mention that I think in the next few months, there will be a balancing act where governments will need to face the trade-off between continuing protection versus running a risk of distorting the economy. And as President Lagarde said yesterday, the support measure might need to be adapted and become perhaps more surgical. Now, perhaps let me get to what I think has been one of the most striking changes coming out of this crisis. And it's really the sudden adoption of digital technology and the fact that firms had to resort to telework practice to be able to continue operating. Now, one thing you could tell me is that adoption of especially process innovation and reorganization during crisis is actually something that is not new. You know, Aguion and St. Paul already in 1998 raised this issue and John, who's going to discuss the paper, has a very recent and nice paper on this. You know, the virtue of a crisis is actually that it lowers the opportunity cost for firms to reorganize and innovate. That's true also in COVID, but for sure a peculiarity of COVID is the fact that it really forced firms to adjust very quickly the way they were producing, so teleworking, but also engaging with their customers or really try to adopt digital technologies that allow them to move from offline to online. Let's think of e-commerce, e-payment, and so on. And indeed this is allowed in the short term an increase in resilience that probably we hadn't expected and everly Haskell and Meisen actually used a very nice term, which I think the use of potential cavital, which is very much the desks, the connection that we have used at home during the last month, have been a great source of resilience which probably according to their estimate contributes at roughly 10% of GDP. So let me start with, I think, telework that has really been, I would say, the epitomization of digital adoption and digital change during business. As I said, there's been a great source of resilience, but it has also contributed to output growth thanks to the savings due to lower commuting costs. There are also potential learning effects and given that the stigma of telework is now being broken, these benefits coming from learning to use digital tools might actually continue beyond the crisis, given the strong expectations that we have found in both managers and workers of a continuation of a hybrid mode of working. That said, the link with productivity is a priori actually ambiguous. And let me stress one potential negative consequence of long-term and intensive use of telework, which is the negative impact of knowledge sharing. And this might be thought of not only the adult knowledge sharing and in-person meeting, but also the serendipitous meeting that someone might have around the coffee machine or even going and buying a sandwich next to someone's office. These are actually crucial for innovation and I really would say at the core of agglomeration economies and knowledge exchanges within a densely populated area. Now, the potential risk is that both within firms this knowledge sharing is diminished and this will lead to lower innovation, but also that across firms within cities, within metropolitan area, these exchanges will be lower and in a way lost. So this is to me the biggest risk from telework for innovation and productivity growth. The second one, and some of this has already been shown, especially in the U.S., is the fact that this might lead to increased inequalities, not only across firms and amongst those who can't telework and not telework, but I think the ones that might be affected much more are those low-skilled workers whose livelihood really depends on white-collar workers who can't telework, continue going to the office and these are the auxiliary services of maintenance and cleaning of offices, but also those that provide amenities around offices. In the paper I go into much more detail about the potential implication of telework on the rule of cities, on real estate prices and also estate supply pressures. I'm not going into that here. Let me go rather to really discuss more in detail the potential scenarios that can arise from this increase in digital adoption. So the shock has really pushed adoption of digital technology at a very fast pace. So we might see an initial drop in output to adjustment to the new technology, but ultimately we should expect an increase in firm productivity. If this is happening across the board in an equal and homogeneous way, then we should see an increase in catch-up of small and medium enterprises. We should see a closing down of the productivity gap between the best firms and the sort of lagging firms and we should see ultimately a lower wage inequality as this is very much related to productivity space. However, what we have seen during the crisis and again this is something that is not new and we have seen it in the past, larger, more digital, more productive firms who had the complementary investment, the complementary intangible assets that are needed to benefit from this investment are actually the ones that were more likely to adopt and more likely to adopt multiple digital technology but also more advanced digital technologies. Now, this will give the larger businesses the ones with the larger market share even more of a lead because they will continue to benefit from the intangible assets being proprietary software, being better management and again, John has done a lot of work on this being, you know, higher organizational capital. So the nature of intangible make it possible for larger firms to benefit more because of the high sun cost and the low marginal cost and the scalability of these intangible and the digital assets. This will perpetuate, if not increase, dispersion in performance, observe pre-crisis and I'm talking about increasing because we have also seen at the beginning that there might be a real location of resources and increase in demand for digital services coming, for example, also from the switch to telework and desalting. So if that's the case, let me show you a figure here. If you look very much, if you compare the two panels in the graph, you see that if I compare low digital intensity sector and high digital intensity sector, we see that the gap between the frontier firms where they look at globally or within European Union and firms below the frontier is actually much larger in digital intensive sectors. Then are we standing the fact that the, let's say, let's call them the rest or the lagging firms are actually seeing also a stronger, I would say, growth or a stronger increase in productivity than the lagging firm in lower digital intensive sector. Suggest that there might be a positive effect also for them from the COVID-led increase in digital adoption. Secondly, I already mentioned the link with wage inequality coming from the fact that the dispersion in productivity is also very much linked with the increase in wage inequality. Finally, and this is probably where I want to spend the next couple of minutes, is really about the increase in markup and concentration that might follow from this increase in adoption. Now, whether we want to call it market power or efficient reallocation, I think it's very much an open question and recent theoretical papers suggest that both might be at play here. But let me focus just on two, let's call them proxy for either markup or efficient reallocation, an increase in markup and an increase in concentration. Why do I think that the increase in digital adoption will increase the average markup trends that we have seen already is because, again, this increase in markup has been much stronger in high digital intensive sector, probably also reflecting, as I said, the nature of intangibility that I discussed, so high and some cost low marginal cost. But interestingly, what I'm showing here on the right-hand side, on the right-hand side panel, is the fact that when I look at the top of the distribution, it's very much firms already had very high digital markup that will continue observing high markup if digitalization continues. Let me now move to concentration, and one important thing to note is the fact that we have seen an increase in concentration already in the last decade and this increase in concentration was particularly strong during and after in the aftermath of the global financial crisis, and especially for high digital intensive sectors. Now, one way of trying to predict in a way because we don't have data for concentration is to look at one of the channels through which concentration increases, which is acquisition, measures acquisition. And what I look at on the right-hand side of the slide here is the share of M&A deeds when I think in values accounted for by deeds where the buyer is actually high digital intensive, in a high digital intensive sector. What is striking is that this has increased already before the crisis, but has continued and this is the only one who has observed growth during the crisis. This is the blue bar by 75%, okay? So this is quite striking, and let me perhaps show the last result and then I'll move on to the last slide is that why is this concerning is because this has happened, the increase in the value of M&A deals has happened much more in industries that were already more concentrated for deals that where the buyer was amongst the largest aid firms in its industries and this was even stronger if we looked at digital intensive sector. So that's why I think we need to really keep an eye on these trends and this why I think competition policies and enforcement will be particularly important in the next few months and years. So let me close just by noticing that I think monetary and fiscal policy have been key and crucial to ensure resilience during the crisis, but structural policy will become a strategic ally to really ensure a recovery that is smooth, that is really getting to be inclusive digital and green. I've already mentioned the importance of skills to ensure a smooth recovery and ensure the mobility of workers. Digital infrastructure is also shown to be very important and I think the complementary investment in tangible assets also for young and smaller firms need to be supported. Let me stop here. One point I would like to say is that yesterday Professor Ivashina really mentioned the importance of insolvency regime. I fully agree with that and I would also stress that in many European countries the judicial system play also an important role. Let me close here and let me thank you again for the invitation. Thank you very much. Thank you very much, Chiara, for this very rich, enlightening and comprehensive presentation about the changes that COVID has brought to us. Some of them will fade away, others for sure that will stay for longer. Now let me turn to our discussant, Professor John Van Rinen, his professor at the London School of Economics and besides that, John is also a digital fellow at the MIT Institute for the Digital Economy. So he's in a very good place to discuss your paper, Chiara. John, you have the floor. Well, thank you very much for the opportunity to share some thoughts on this excellent paper that Chiara has just presented. I really recommend that you read the paper. It's incredibly comprehensive of almost everything we currently know, I think, about the impact of COVID on the business landscape, particularly around productivity in the Euro area. I really recommend reading for policymakers and students. There's lots of fascinating empirical nuggets in the paper around what's happened over the last couple of years of productivity. So as Chiara said, it's a striking thing. It was the first half of last year. Productivity actually rose, as although output fell, hours worked, fell by more than output, hence measured productivity increased. Also, there was this interesting between-sector movement. So more activity moved towards the kind of more productive sectors. So a wave of retail towards the manufacturing. And then within sectors, although there was some slowdown of reallocation, it was still positive, the paper argues. And it was better, look at entry rates, for example, they have been relatively high in the pandemic period compared to the global financial crisis where they fell a lot more. Furthermore, there's been this faster diffusion of certain types of technologies, like digital technologies and telework. And interestingly, as the paper points out, these are stronger in the places which are already adopting lots of digital technologies. So this is going to actually increase the overall inequality between firms. And that is something which Chiara and her colleagues that I was here pointed out. I call this increasing differences between firms that you see in a large number of dimensions, productivity, markups, labor shares and wages. And I kind of documented this in a kind of Jackson-Holtz talk I gave a couple of years ago. And I'm doing some work on detail and inequality with you to show how that's going to continue. I think these are all fascinating. But of course, you've got me here, Dr. just to congratulate Chiara. I have to say a few things. So I just got to talk about the challenge. Four points I'd like to see developed more. The paper, these are already mentioned, but I'd like to bring them out and then end up with what I think is really required in terms of policymaking, which is a growth plan for Europe and more generally in the developed world. So here's the challenge. We know this. This is going to GDP growth. Those of you who are already a member of the Global Financial Crisis like myself were told this is a once-in-a-lifetime horrible shock. In fact, we've got another even more horrible shock last year. So you can see this is the hole that we're in that we're trying to dig ourselves out of. But it's just as important to remember that the problems long predate the current pandemic shock. So if you look at total factor productivity growth, the proxy for technological change since the Second World War in the Euro area countries, you can see that the pattern has been one of decline. So from the very fast post-war reconstruction, halting off the oil shocks, going further down in the ninth season, even prior to the financial crisis, these TFP numbers were very, very poor, so a third of a percentage point going into the crisis. And the US had, there was less destruction, so therefore less TFP growth after the Second World War. There's also been a slowdown. Interestingly, the era of the internet boom was much raised productivity a lot more than the US that did in Europe. And I'll come back to this as an example of how we need to make the best use of opportunities, especially in Europe, which we may not have done. So four points on, I'd like to see a little bit more in the paper. So one of the analytical frameworks that Cara laid this out very well, this really goes through two of the big drivers of accurate productivity, which is the diffusion of new technologies and a reallocation, which is reduced, potentially reducing misallocation or increasing misallocation. I'd have liked to have seen a bit more on innovation. So how the crisis may have affected frontier innovation growth. And Cara mentioned that a little bit on the impact of the crisis maybe reducing serendipitous creativity. So I like that. There's also a risk of cutbacks, I think, in terms of research development that the lower demand, the greater uncertainty, reduced incentives to invest in R&D, the lower ability because of credit shocks, a natural time diversion. So this may actually reduce some innovation at the frontier. So there's a little bit of evidence on this. So I'd like to see a little bit more on this. And also it's important that in a way it's the direction of technical change which has been influenced by the crisis. The overall level of diffusion may have actually decreased. I'll mention that in a second. Second thing, measurement. Well, this is a bit of a boring point but I think it's important. It's always hard to measure productivity. It's particularly hard in times of crisis and it's particularly hard in COVID. Think of productivity. It's output per worker hour. Both of these are hard to measure. Worker hours particularly are tricky to measure given working from home and how heavily subsidized we've had through furlough schemes and other things. So I think it's particularly measuring TFP I think during the crisis but people are really hopeless. It's so hard to measure capital inputs the best of time. So I think we're hugely mismeasuring productivity. But even if we knew precisely what happens productivity, how much does it actually matter? The key issue for me and I think for policy makers and the ECB and elsewhere is what will happen when things start to return to normal? How much to the shock can be recovered? And I think that the measurement of what's happening now may not be necessarily a great indicator of how we can return to more normal times. Third point of reallocation. Economists like myself love reallocation. There's lots of reallocation going around offline and so on. But it's a bit of a loaded term. And Icaro did mention that it's really important. So often we say, well, there's a decline of activity in low productivity units whether that's industries or firms or plants. And that looks good because you think, well, these low productivity things should shrink. But if high productivity units, whether it's industries or firms, don't expand sufficiently to absorb the loss of people of hours and assets, then this is really waste. And this is sometimes bad productivity growth. If you're destroying activity without creating high productivity activity, welfare is going to decline. So I think this is really important to bear in mind. And this balance between protection and reallocation, especially as we come out of the crisis, is very important. I think one of the lessons I hope we learned from the global financial crisis was that we moved in many parts of the world too quickly to austerity. Think about the UK. I think this is a classic example, cutting back on public investment too quickly. And this is one of the reasons that we've also had particular problems in some countries with poor performance. Finally, in terms of adoption, I think as Kyar said, there's a lot of evidence that there has been greater adoption of digital technology and telework. But we should ask the question whether it's efficient or not. So it may have been that maybe it was efficient because companies price the crisis were not investing enough in these things. There could have been a lack of experimentation. Maybe there was spillovers. Maybe there's a lack of coordination. So all those things may be true. And COVID force, good things happen. But these may not be the case. And it may be that COVID has just to be added to the cost that companies have to bear. And this is a kind of force of inefficiency. Another way of thinking about this is what about all the other types of non-digital technologies? You could argue they haven't increased so much. So although COVID's twists the direction of technical change, it may not speed up. In fact, it could have actually slowed it down. So I think that's a really important thing to think about in terms of thinking about the overall effects on productivity. I'd like to see a little bit more within-firm productivity change. In fact, in the aggregate terms, within-firm changes typically dominate between-firm changes. And it'd be nice to see a little bit more on the kind of firm level of productivity changes. So in my last couple of minutes, I'd just like to say what I think is the most important thing we should be thinking of in terms of post-pandemic policymaking. In my view, what I hope the pandemic does is actually change many of the ways that we have policies. And we have these tremendous challenges going into the pandemic. We had low productivity growth. And I think what we need is a really ambitious thinking of kind of a new martial plan for growth based around both innovation and diffusion of best practice. This has to be based on rigorous evidence. I've outlined this in some of my particular things I've done with colleagues like Nick Bloom and Heidi Williams, Daniel Skir. We tried to create these policy toolkits for how you would look at the evidence and try and evaluate it in terms of cost-benefit and also timeframe and inequality. These two toolkits we've developed for management on the one hand and innovation on the other hand. For innovation, I'd say, you know, obviously there's lots of things, but one thing I'm particularly passionate about is that we lose, in my view, in Europe and around the world, many of our inventors because we fail to actually remove the barriers for many underrepresented groups, whether it's minorities, kids from low-income families or women, who could become the inventors and entrepreneurs of the future, the so-called lost Einstein's and lost Marie Curie's. I think, you know, there's many policies which we could think of as non-conventional in the policies towards innovation to reduce those barriers, which could increase our innovation capacity tremendously. The exact way we do this is going to depend on our country's conditions. I'd say we need to, you know, three key factors, balancing protection or allocation, thinking about institutional reform to combat what I call policy attention deficit disorder, particularly around long-run investments. And I think we can bundle these different policies around innovation, diffusion, around the climate mission in order to actually put these together in a way to actually create a new kind of growth plan. Many people say I'm over-optimistic, this can't be done. You know, I think, you know, one example where it did happen was after the Second World War when that huge, negative shock galvanized policy makers around the world to create different growth plans and institutions which enabled us to have, you know, for many decades, very sustainable productivity growth. So I think it's not, you know, a historical necessity, but it is certainly a historical possibility and it's what I think we need to seize. Thank you very much. Thank you very much, John. Thank you very much because for both of you, you have perfectly adjusted to the speaking time. So congratulations in that respect. And thank you very much, John, for your remarks, for your thoughts and for, you know, ending up with, you know, an optimistic note that I think that is very important in life. So now, before we start to receive questions, I don't know whether Kiera, do you want to react to, you know, the remarks made by John? I mean, first of all, let me thank John. I mean, his remarks are always to the point and great. Perhaps let me say two things. I completely agree with the point he's making about the lost Einstein. And I think actually the lack of infrastructure and the lack of skills in many countries might transform the COVID in another, I would say, fatality for lost Einstein's because, I mean, one of the biggest, I think, fear in the long run, which I didn't mention, but it's the consequences for the generation of those who are now in schools or in universities to really miss another opportunity to become, you know, the next Marie Curie, let me be a bit feminist there. The second point I wanted to make is the fact that I didn't look, it's true, at frontier firms. Partly this was driven from the fact that when I looked at national accounts, they didn't look at the intangible assets there, which I think are very much driven by investment amongst the frontier firms. This has been very resilient during COVID, I showed this in the paper, and much more resilient at investment in intangible assets. The second, I would say, the second pattern that made me be a bit more optimistic about frontier innovation is the fact that capital markets perform remarkably well and that 25 firms actually were the ones that represented about 40% of gain in capital in the market. So again, you know, this suggests some good news. And finally, the measures and acquisition trends to me show that actually there are a few firms are still quite strong. But I do agree completely on the direction of technical change and the risk of duplication of efforts on digital technology. So this is something I will for sure include in the paper. So thank you. Thank you to John. Thank you very much, Kiera. Thank you very much, John, again. We have not received any questions so far. I suppose that they are coming. So, you know, I will take advantage of my position as moderator of this discussion. And I would like to ask a question to both of you. It's quite obvious that COVID is, let's say, a big major disruption of the supply side of the economy. You have mentioned a lot of changes. Perhaps, you know, this kind of changes, do they have any sort of impact on the way that we are modeling the behavior of the economy in the future? Our present models that are in QCCM models based on the Phillips curve, are they able to capture, you know, the kind of modifications and the kind of changes that COVID has produced in your view? That's a tough question, but perhaps let me mention one thing, especially regarding the Phillips curve, is that one of the, I think, most striking feature of COVID is, as I said, the rise of intangible assets, the importance of intangible assets and the rise of digital technologies. If this continues beyond the crisis and I believe it will, it will flatten even more the Phillips curve and, you know, in a way also, given the rise in markups, it will weaken perhaps the transition mechanism, the way we see it of monetary policies. So this is something that I think needs to be perhaps considered more closely in the models. The second, I think, is the rise of wage inequality, which might also sort of be a consequence of this crisis, both through digital adoption and telework. So these are two things that I think need further attention, I would say. John, I leave you the floor. No, it's an excellent question. It's a very hard question. I mean, I think, I mean, you're pressing on the kind of performance of the typical macroeconomic models, which is used by the ECB in the Fed and general macroeconomic models. And, you know, it's a well-known kind of issue, I think, with those models is that they don't really handle, you know, growth very well. Growth is, you know, more or less exogenous to the whole modeling setup. And I think that, you know, that's maybe a reasonable approximation for short spaces of time. But I think when we look over, you know, major changes in the economic structure and when we think about the long-run, the kind of growth, structural growth policies that I think are really important in what ultimately deliver improvements, I don't think they are really adequate. I think we do need to, it's hard, but I do think we need to think much harder about trying to build in how we think different shocks affect, growth affect. I think in macroeconomics for a long time we've had this, you know, useful division of labor between people who think about longer-run growth and people who think about short-run fluctuations. But I think that the vision is actually blocked us off from actually asking many of the important questions about how those two things interact, how short-run shocks actually affect longer growth, and also, more importantly, for me, how you can actually try and affect the growth rate. I mean, this is kind of very much the city baggy on view of the world, which I subscribe to, but I don't need to accept we are in a permanent, you know, low-growth situation. There are things that we can do about that, you know, the social development, innovation, improving diffusion, very much things the OEC talks about. So I kind of, you know, I would push for some reforms, I think, of trying to enable our models to become richer, to think about those effects. Thank you very much, Kiara and John. We have a first question about CISOVA and you know, I will read the question in which ways did the pandemic change the competitive position of different companies? What could be implications for market structure and competition policy? Kiara, John? Yeah. I mean, as I said, I think the way the COVID crisis has affected the market structure is that larger firms were already digital and were already in a good financial position before the crisis continue to maintain their advantage and if anything also thanks to the measures and acquisition that I've shown have maintained and strengthened their advantage. So I think, you know, competition policy and competition enforcement need to be particularly sort of, I would say, under those in the next few months and really you know, antitrust policy need to be you know, to be I would say enforced very closely. The second I think important issue is the fact that there might be new opportunities coming in and that's where startups might play an important role and I'm thinking in particular when we look at the venture capital data we see very much the increase in financing of digital technologies sort of remote technologies that allow remote connections but also the green. So that's where I think the government can play a role either through funds of funds in public-private partnership with venture capital but also allowing sort of the level playing field in these areas. So that's where I see things moving. Yes, I think this is a really important question which Kiarra also touched on. I mean, I think stepping back, it's worse thinking about these longer run trends of what's happened to western economies over the last 30 or 40 years and one of Kiarra touched on one of the most startling things that I noticed when I was looking at the data that people have noticed is that across a wide swathe of industries you've seen concentration, you've seen a generalized increase of markups and that's been particularly strong in some sectors as we know like digital sectors and there's different causes of that and those are still under debate. I think one of the factors is clearly innovation and the generation of network effects through many of the digital sectors but I think all of us are concerned that given that rise of the tech giants, the GAFAMs and other Walmart and the other mega firms superstar firms that these firms are able to use the power in ways which might be detrimental to consumers and to workers and what's happened during COVID is that that strength has been tightened so think about the digital sector this mass move to what we're doing now on Zoom on online platforms that of course has led to this amazing share price boom of companies which are already already very, very powerful. So I think we do need to rethink the kind of competition rules. I mean the principles I think are still right but we need to reinterpret them to deal with the challenges that we face in this kind of new the new era that we have. So I think it's you know I've written there's a lot of things written on this Sean's role there's an excellent paper for this digital review that I'm involved with I think the way, the broadly speaking the way we need to change our competition policy is to think a lot more about future competition than past competition. The traditional way that competition authorities do things like look at a mergerist look at the existing market shares of firms. That's useful for a kind of old economy firm when you tell if you've got high market shares prices going to go up for new economy these type of industries it's all about future competition I think you have to take a much more forward-looking type of view and the things that you're worried about are much more well if this acquisition happens is it going to weaken a future potential competitor to a dominant platform so you know classic thing when Facebook takes over Instagram or WhatsApp could those platforms have been future competitors to this dominant platform and you know we should really put the burden of proof on the digital platforms to assure us that when this happens there's not going to be things which actually entrench their market power further so that's one set of reforms we need as the European Union is doing a digital services act or the digital markets act in the UK we have to have a form of regulation which is kind of future looking so not just dealing when there's a merger but also thinking about how you create things like data interoperability and data portability to deal with the underlying market power that these firms have and enable the kind of entrance that Kara is talking about is coming to the market so I agree that the ability of small new firms and small firms to enter and scale up is absolutely critical and there may be lots of activities that the large firms do to kind of chill that so we really do need to find ways in which we can reduce the risk that even if these tech titans have got to their positions they're entirely competing on the map on the you know in a genuine way that in the future that this power is not being used in a way to reduce competition and reduce productivity growth thank you very much I am informed that Elisabetta is connected now you know I don't know whether Elisabetta do you want to add anything that's great do you hear me we can hear you perfectly perfect yeah so thanks first of all for a very well structured and comprehensive presentation and discussion and I have a small question which maybe is out of scope of the paper that was just presented but you mentioned inequalities and in a sense that the productivity shock can affect different groups of people and in particular let's say females and males do you see it as a risk post-COVID that for example inequality between men and women could actually increase and what can be a potential policy response to this challenge thank you thank you very much Elisabetta so that's a very good question so let me mention how I sort of looked at wage inequality in the paper so I think there is increasing evidence both within countries and also from a recent study we have started at the OCD using much employer-employee across countries that one of the drivers of the increased wage inequality has actually been the increased differences in pay policy for similar worker across firms and we also show that these between firm wage inequality is actually very closely related to differences in productivity so that's one source that will drive I think the increase in wage inequality about men and women we also see in this study that there is some sort of selection I would say of women in low paying firms and in a way one option or one possible scenario is that telework will actually allow women not to select directly when they enter the labour market in the low paid firms however one risk of telework and again this might affect the progression of the wages of women within firms is the fact that women tend to be promoted less for various reasons partly because they don't choose the most visible or they're not given the most visible jobs and the second reason might be the fact that women are less likely to specialise still today in STEM skills which are particularly important in a more digital intensive economy see all these reasons might suggest that actually women or the gap the gender gap in wages and the wage inequality of women for women will increase after COVID now these are all speculation I don't have the data to show this but this to me are all potential reason and that I would say tend to make us think that wage inequality for women might actually increase with COVID I don't know if Jonas looked at this more directly I have I don't know of any direct data on this I mean you know you can see effects going different ways so one aspect of inequality addition to what Kara mentioned is kind of young workers versus older workers I think this is the really serious concern so I think obviously as Kara mentioned there's the kids who are going through school like my daughter and this has been incredibly disruptive but particularly for low income young people who you know haven't got the same you know facilities that we have so I think there's a huge learning gap and I think there has to be a big investment in trying to help kids especially from disadvantaged families catch up with the kids from more disadvantaged families I think that's number one and then when people go into labour force I think you know one of the ways that young workers especially learn is from informal interactions you know with Kara talking about you know the service meetings sitting in new meetings getting help from other workers getting training that's much much harder to do you know when you're doing that when you're working from home or doing that offline I do think that's a serious concern that the career progression of young workers is going to be much harder for the cohorts who are coming in during this kind of COVID period so that I think is a major source of equality and I think that also relates to women as well because I think the progress that women have been making which has been too slow but the progress which has been made has been through new cohorts of women coming in and being able to get up in the ladder within firms and move up the hierarchy you know that's going to be very hard to do without some of those more informal connections so that on the other hand you might say well maybe those informal connections always benefited men more than women like you know going for a drink in the bar or the pub after work which women may not be able to do because of you know child care burdens falling more upon them so the more formalization may cut in the opposite direction so there could be you know potential positives as well from the change in the way we work but I think those would be the things I mainly worry about especially for younger workers it's really going to be you know young people this is the COVID shock is really going to increase inequality between young and old for seeing in a number of different dimensions thank you thank you very much we have time for you know the last question it's coming from you know a colleague of you Kiera Dan Andrews Dan you have the floor thanks very much Kiera a terrific paper and thanks Jacque for the discussion it's great as well I'd like to get your views on what was the intrinsic nature of the COVID shock for market selection so as you know a lot of OECD countries did some very unconventional things in terms of policies that prioritized preservation over reallocation most notably through the use of job retention schemes and so one of the issues is that we don't observe what would have happened without that policy intervention and so I guess you know it could have gone two ways one would have been that you would have had some sort of shimperterian cleansing dynamic here and John talked a bit about that and Jacque did all sort of the flip side writers you could have had some scarring effect right where you had some indiscriminate shake out of firms now in terms of like work my own work from Australia using administrative data we see that the job retention scheme there at least as first phase was more likely to protect high productivity and particularly financially constrained ones which kind of raises the prospect that COVID may have been distorted and in a sense policy may have actually worked to kind of correct that distortion so would it be possible for you guys to talk a bit more about what we know about that particularly in Europe as well I mean I think the most compelling evidence on this really comes from I would say from France and partly also there is a study that looks at Portugal where perhaps the outlook is not so positive but let me focus on France and I think here the evidence is that support went to the firms in need which might be the most financially constrained ones not necessarily the most productive one and I think in a way that that is what you want, you want the firms that need support more to be helped now probably I know in your case in the case of Australia I think that the support was much less generous in France it was extremely generous there were at least four large support measures that were put in place and I think the fear there would have been that the larger firms actually used or the most productive firm used this support measure more than those that really needed it and that is something that hasn't happened so for me selection has really been very much in terms of needs in terms of who has seen the largest liquidity shortfall and then the second I think criteria of the selection that we have seen across countries but again quite strongly in France is one a sectoral need so the sectors that needed support more were the ones that were targeted which again is I think what you really wanted given the nature of the Covid crisis I don't know in the UK I think the furlough scheme has also been quite effective probably it's been effective of avoiding mass unemployment so the mass wrapping of assets I think which is a good thing I think we have to again I think it's a sub-love reallocation but I think we have to be realistic I mean in the global financial crisis a lot of the firms who went under were not the least productive firms but they were kind of relatively productive firms who were financially constrained so that actually is not good for productivity at all and I think there was just mass support in the Covid era I think which was necessary I think the issue is going to be the amount of that as we withdraw support what now happens and how we unwind that there's kind of like in the UK I think there's something like 70 billion pounds of of death which is outstanding and I think a lot of you know we're going to have to face up to the fact that a lot of that is going to have to be written off so how we do that debt restructuring is I think going to be a major challenge in terms of thinking of unwinding some of these schemes quickly then we're going to end up destroying a lot of valuable human non-human assets if we do it too slowly we're going to end up with a lot of misallocation so I think in terms of thinking about debt for equity swaps thinking about many of the things we think about restructuring of debt in developing countries actually maybe kind of tools we want to think very hard about but it's going to facing us very directly right now okay thank you very much to both of you Kiaran John it has been extremely interesting I think that it has been a very a very rich discussion I think that we have covered a lot of a lot of ground as John has indicated COVID perhaps is one in a live shock I hope that over the next decades we will not have you know a similar soak again at least over the next two, three, four, five decades I think that you have mentioned you know a lot of implications in terms of productivity in terms of market power in terms of of equality and perhaps you know the the main conclusion is that perhaps we have an economy pre-COVID and we will have a different economy post-COVID and now well let's start to to close this session and to prepare for the next one Kiaran Thank you very much I'd like to thank Kiaran for such a well structured and wide ranging paper and John too for drawing on some of the policy implications what I really liked about this session was that you not only got a sense of how what we've seen during the pandemic has exacerbated trends we've seen in recent decades but we got a lot of discussion of how now we're approaching some sort of normal we need to adjust the policy measures that were put in place and thank you very much once again to Mr Degindos for the second day in the row you've gotten us to a very strong start we're going to take a short break now we'll be back at 1515 Central European time so please join us then