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The Zombification of the Economy? Assessing the Effectiveness of French Government Support During COVID-19 Lockdown

Author

Listed:
  • Mattia Guerini

    (University of Brescia
    Fondazione Eni Enrico Mattei, Milan (Italy))

  • Lionel Nesta

    (Université Côte d'Azur, France
    GREDEG CNRS
    OFCE, SciencesPo
    SKEMA Business School)

  • Xavier Ragot

    (Sciences Po, Department of Economics and OFCE, (France))

  • Stefano Schiavo

    (University of Trento
    OFCE Sciences Po. Paris)

Abstract

This paper evaluates the risk of zombification of the French economy during the sanitary crisis, as a result of the unconditional financial support provided to firms by public authorities. We develop a simple theoretical framework based on a partialequilibrium model to simulate the liquidity and solvency stress faced by a large panel of French firms and assess the impact of government support measures. Simulation results suggest that those policies helped healthy but illiquid firms to withstand the shock caused by the pandemic. Moreover, the analysis finds no evidence of a “zombification effect†, as government support has not disproportionately benefited less productive companies.

Suggested Citation

  • Mattia Guerini & Lionel Nesta & Xavier Ragot & Stefano Schiavo, 2022. "The Zombification of the Economy? Assessing the Effectiveness of French Government Support During COVID-19 Lockdown," GREDEG Working Papers 2022-24, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2022-24
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    Cited by:

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    2. Enrico Turco & Davide Bazzana & Massimiliano Rizzati & Emanuele Ciola & Sergio Vergalli, 2022. "Energy price shocks and stabilization policies in a multi-agent macroeconomic model for the Euro Area," Working Papers 2022.25, Fondazione Eni Enrico Mattei.
    3. 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.

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    More about this item

    Keywords

    Covid-19; zombie firms; job-retention schemes; microsimulation; policy evaluation;
    All these keywords.

    JEL classification:

    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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