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.