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Loans vs Subsidies: Lithuania's State Support Policies During the COVID-19 Pandemic

Author

Listed:
  • Mustapha Douch

    (University of Edinburgh)

  • Egle Jakucionyte

    (Bank of Lithuania and Vilnius University)

  • Swapnil Singh

    (Bank of Lithuania and Kaunas University of Technology)

Abstract

This paper analyzes the firm's choice between subsidy support and loan support during the COVID-19 crisis and explores the implications of this choice on firms' employment growth. We compile a novel micro-level dataset of Lithuanian firms' balance sheet data and government support records during the pandemic period. We use the dataset to provide a set of stylized facts, categorizing the variety of enacted support policies and tracking aid distribution patterns. We show that larger firms were more likely to choose loans over subsidies. This result cannot be fully explained by policy eligibility criteria and the severity of the pandemic shock, suggesting that firm characteristics played a significant role. Finally, we show that the type of support has implications for firms' outcomes – subsidy-recipient firms experienced higher employment growth compared to loan-recipient firms.

Suggested Citation

  • Mustapha Douch & Egle Jakucionyte & Swapnil Singh, 2024. "Loans vs Subsidies: Lithuania's State Support Policies During the COVID-19 Pandemic," Bank of Lithuania Discussion Paper Series 36, Bank of Lithuania.
    • Handle: RePEc:lie:dpaper:36
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