Working Paper: CEPR ID: DP17552
Authors: 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.
Keywords: productivity; reallocation
JEL Codes: O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| covid19 subsidies (H25) | firm productivity (D22) |
| covid19 subsidies (H25) | aggregate productivity growth (O49) |
| firm productivity (D22) | market behavior (D40) |
| subsidized firms (R38) | non-subsidized firms market share (L19) |
| covid19 subsidies (H25) | market exit propensity (C69) |