Did Job Retention Schemes Save Jobs during the Covid-19 Pandemic? Firm-level Evidence from Latvia

This paper studies the employment effect of the job retention scheme implemented during the Covid-19 pandemic. Using firm-level data from Latvia, we investigate whether a change in the number of employees in firms that received support from the job retention programme has been different from that of similar firms which did not receive such support, and whether these differences have disappeared over time. We find strong evidence that job retention scheme participants in Latvia were less likely to cut employment and that this effect persisted for several months after receiving support. Participation in the job retention scheme affected both the likelihood of a firm’s survival and the rate at which employees were laid off. Our results also suggest that the participation effect was not uniform across firms, with the effect being less pronounced in service sectors with a higher level of contact intensity and more pronounced in sectors with a higher proportion of highly skilled employees.