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Policy Brief No. 8

“Creative destruction” in Slovak labour market: Impact of COVID-19

“Creative destruction” or reallocation of labour from less productive to more productive firms has been an ongoing phenomenon in Slovakia even prior to the pandemic. While the pandemic did have some effect in accelerating this process by enabling highly productive firms to expand at a faster pace, the impact was only marginal. However, the government’s job retention schemes implemented during the pandemic unintentionally introduced some repercussions by providing support to low-productivity firms. Nevertheless, it is worth noting that the negative impact on “creative destruction” due to these measures has been minimal in magnitude.

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