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Government Support and Firm Performance during COVID-19

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  • Bruhn,Miriam
  • Demirguc-Kunt,Asli
  • Singer,Dorothe

Abstract

This paper assesses the medium-run effects of government support to firms during the COVID-19 crisis and whether the effectiveness of this support varied with its timing. Using data from three rounds of the World Bank’s Enterprise Surveys COVID-19 Follow-up Surveys carried out between May 2020 and April 2022, it relates government support in Round 1 (received in the first half of 2020) and Round 2 (received during the second half of 2020 or early 2021) with firm performance in Round 3 (generally mid-2021). Controlling for a host of background characteristics, firms that received support in Round 1 performed better in terms of Round 3 sales, but only if they did not have continued support. Firms that also received support in Round 2 had similar Round 3 sales as those that received no support and were more likely to decrease employment. Firms that received government support only in Round 2 experienced no boost in Round 3 performance. The findings suggest that government support should be provided promptly, but it should also be phased out quickly.

Suggested Citation

  • Bruhn,Miriam & Demirguc-Kunt,Asli & Singer,Dorothe, 2023. "Government Support and Firm Performance during COVID-19," Policy Research Working Paper Series 10641, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10641
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    File URL: http://documents.worldbank.org/curated/en/099404412122317205/pdf/IDU0d4cdf5830014b043cf0801e03451560fd5f5.pdf
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