The Effect of Recessionary Fiscal Stimulus on Small Firm: Evidence from a Credit Guarantee Scheme in the UK
Posted: 17 May 2019 Last revised: 2 Apr 2020
Date Written: April 1, 2020
We estimate the impacts of small-firm credit guarantees launched in the UK during the Great Recession. For identification, we exploit the plausible exogenous variation in participation from the firm-size eligibility threshold. On average, eligible firms increase performance, survival, and employment, but not investment, relative to non-eligible firms. Results appear driven by a minority of businesses that takes up the scheme in industries with high costs to train workers. Our results are consistent with the guarantees enabling some financially constrained firms to retain critical workers, which otherwise would have been laid off, and which were fundamental to rebuild the businesses post-crisis.
Keywords: Collateral, Credit Guarantee Schemes, Employment, Financial Constraints, Investment, Irreversibilities
JEL Classification: D04, D22, G21, G28, G38, H32, H81
Suggested Citation: Suggested Citation