We find that more productive firms with a higher share of labour cost and ex-ante experience in dealing with the state received support with higher probability. We consider the selection of firms to receive subsidies with respect to various firm characteristics. Did the firms in need receive the support? Which firms have been supported? Was the support sufficiently efficient and effective? What macroeconomic implications of the support can we expect? Therefore, there was strong pressure to introduce unique economic measures without in-depth ex ante impact analyses. Preliminary analyses (e.g Schivardi and Romano 2020) showed that firms, especially the ones operating in the most affected sectors with no or limited revenues, could relatively quickly suffer from insufficient liquidity. The speed and the scale of the economic shock associated with the new coronavirus called for immediate action. A standard list of policy responses ranges from tax deferrals and public guarantees to direct grants. Governments and financial and monetary authorities across the world took action and introduced various fiscal, monetary or financial policy measures. The outlook of massive and permanent cuts in employment and investments motivated governments to introduce extensive measures that would help businesses survive the pandemic without unnecessary layoffs or bankruptcies, and avoid a greater economic decline. According to Gourinchas (2020) the economy was facing a ‘flatten the curve’ problem and without proper macroeconomic support we would face a sharper and more intense economic downturn associated with larger losses. While widespread restrictions on travel and mobility, together with an erosion of confidence and increased overall uncertainty, led to loss of revenue in most industries.Īs summarized by Baldwin and Weder di Mauro (2020) we can recognize three types of economic shock from COVID-19: medical shocks, economic impacts of containment measures and expectation shocks. Unprecedented measures to contain the epidemic, including lockdowns, resulted in temporary closures of many businesses, especially those that provide in-person services. The spread of the coronavirus COVID-19 led to a steep decline in economic activity across the world. Our estimates also confirm that larger firms, receiving smaller relative size of the support, have more space to cover their additional liquidity needs by increasing trade liabilities or liabilities to affiliated entities, while SMEs face higher risk of insolvencies. Government wage subsidies somewhat mitigate firm losses and have statistically significant effect, but relatively mild compared to the size of the economic shock. By assuming constant cost elasticities to sales, we show that the pandemic deteriorates strongly firm profits and increases significantly the share of illiquid and insolvent firms. General distribution rules designed on the fly may bring close to optimal results in terms of the support allocation, as relatively more productive, privately owned, foreign-demand oriented firms are prioritized and firms with a high environmental footprint or zombie firms record a relatively lower chance of obtaining government funding. The results, drawing on the experience of a small open European country, suggest the distributed COVID-19 subsidies save non-negligible number of jobs and sustain economic activity during the first wave of the pandemic. We utilize several unique firm-level datasets in order to assess the efficiency and effectiveness of the government support aiming to curb the economic consequences of the coronavirus pandemic.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |