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

Author

Listed:
  • Jozef Konings
  • Glenn Magerman
  • Dieter Van Esbroeck

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

  • Jozef Konings & Glenn Magerman & Dieter Van Esbroeck, 2022. "The Impact of Firm-level Covid Rescue Policies on Productivity Growth and Reallocation," Working Papers ECARES 2022-28, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/349952
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Productivity; productivity growth; aggregate productivity; allocative efficiency;
    All these keywords.

    JEL classification:

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

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