Information Frictions and Firm Take Up of Government Support: A Randomised Controlled Experiment

Abstract

This paper studies whether informational frictions prevent firms from accessing government support using a randomised controlled trial. We focus on two Portuguese COVID-19 relief programs, providing (i) wage support for workers who are kept on payroll and (ii) credit lines backed by government guarantees. We randomly assign firms to a treatment providing either simplified information about a program, or a combination information and step-by-step application support. We find a significant treatment effect on take up of the wage support program. Our results constitute direct evidence that information frictions act as a barrier to comprehensive distribution of firm-level support measures.

Keywords: Take-up of government programs, COVID-19, SMEs, Information

JEL Classification: G38, G41