DP16885 Technology and Resilience

Author(s): Xavier Cirera, Diego Comin, Marcio Cruz, Kyungmin Lee, Jesica Torres
Publication Date: January 2022
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Programme Areas: Development Economics, International Macroeconomics and Finance, Macroeconomics and Growth, Organizational Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16885

This paper estimates the impact of technology sophistication pre-COVID-19 on the performance of firms during the early stages of the pandemic. We exploit a unique data covering firms from Brazil, Senegal, and Vietnam using a treatment effect mediation framework to decompose the results into a direct and an indirect effect. Increasing pre-pandemic technology sophistication by one standard deviation is associated with 3.8pp higher sales. Both effects are positive, but the direct effect is about 5 times larger than the indirect effect. The total effect on sales is markedly nonlinear with significantly smaller estimates of the reduction in sales for firms with more sophisticated pre-pandemic technology. Our results are robust to different measures of digital responses and matching estimators.