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The Impact of Firm-level Covid Rescue Policies on Productivity Growth and Reallocation

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  • Konings, Jozef
  • Magerman, Glenn
  • Van Esbroeck, Dieter

Abstract

We analyze the impact of Covid-19 rescue policies on both firm-level and aggregate productivity growth and reallocation. Using administrative data on the universe of firms’ subsidies in Flanders, we estimate the causal impact of these subsidies on firm-level outcomes. Firms that received subsidies saw a 7% increase in productivity, compared to firms that applied for, but did not obtain subsidies. Furthermore, the propensity to exit the market was 43% lower for treated firms. Aggregate productivity growth, a share-weighted sum of firms’ productivity evolutions, amounted to 6% in 2020. While within-firm productivity growth was similar for both subsidized and non-subsidized firms, there is a reallocation of market shares from subsidized firms to non-subsidized firms. These results suggest that Covid rescue policies helped firms to sustain and preserve productivity, while not obstructing allocative efficiency gains to non-subsidized firms.

Suggested Citation

  • Konings, Jozef & Magerman, Glenn & Van Esbroeck, Dieter, 2022. "The Impact of Firm-level Covid Rescue Policies on Productivity Growth and Reallocation," CEPR Discussion Papers 17552, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17552
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    2. Krieger, Bastian, 2024. "Heterogeneous university funding programs and regional firm innovation," Research Policy, Elsevier, vol. 53(5).
    3. Masayuki MORIKAWA, 2025. "Performance of Firms Using COVID-19-related Support Policies: Ex-post evaluation," Discussion papers 25107, Research Institute of Economy, Trade and Industry (RIETI).
    4. Giulia Canzian & Elena Crivellaro & Tomaso Duso & Antonella Rita Ferrara & Alessandro Sasso & Stefano Verzillo, 2025. "The Impact of Financial Support to Firms during Crises: The Case of Covid Aid in the EU," Discussion Papers of DIW Berlin 2116, DIW Berlin, German Institute for Economic Research.
    5. Martins, Ana & Pereira dos Santos, João & Pozzobon, Fernando, 2025. "Sailing Through Troubled Waters: Evidence from Support Discontinuities to Firms in Times of Crisis," IZA Discussion Papers 18136, Institute of Labor Economics (IZA).
    6. Alm James & Barreto Raul A., 2024. "Trust in Government in a Changing World: Shocks, Tax Evasion, and Economic Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 24(1), pages 439-487, January.
    7. Ana Martins & João Pereira dos Santos & Fernando Pozzobon, 2025. "Sailing through Troubled Waters: Evidence from the APOIAR Program," GEE Papers 190, Gabinete de Estratégia e Estudos, Ministério da Economia, revised May 2025.
    8. Lily Davies & Mark Kattenberg & Benedikt Vogt, 2023. "Predicting Firm Exits with Machine Learning: Implications for Selection into COVID-19 Support and Productivity Growth," CPB Discussion Paper 444, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Ascari, Guido & Colciago, Andrea & Silvestrini, Riccardo, 2023. "Business dynamism, sectoral reallocation and productivity in a pandemic," European Economic Review, Elsevier, vol. 156(C).
    10. Archanskaia, Elizaveta & Canton, Erik & Hobza, Alexandr & Nikolov, Plamen & Simons, Wouter, 2023. "The asymmetric impact of COVID-19: A novel approach to quantifying financial distress across industries," European Economic Review, Elsevier, vol. 158(C).

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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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