Productivity during recessions with banking crises: Inter-Industry evidence

- Recessions are associated with a decline in per-worker productivity.
- The effect is stronger if the recessions are accompanied by banking crises.
- Financial frictions make the negative effect on productivity even stronger.

Using sectoral data from 104 countries over 40 years we show that per-worker productivity declines during recessions. The adverse effect is particularly strong if recessions are accompanied by banking crises and especially in sectors and countries with greater financial frictions.