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

32 Pages Posted: 14 Jul 2021

See all articles by Claudia Custodio

Claudia Custodio

Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Chris Hansman

Imperial College London

Diogo Mendes

Stockholm School of Economics; Swedish House of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 2021

Abstract

This paper studies whether informational frictions prevent firms from accessing government support measures using an encouragement based randomized controlled trial. We focus on two COVID-19 relief programs for firms in Portugal. These programs provide (i) wage support for workers who are kept on payroll and (ii) lines of credit backed by government guarantees. We randomly assign firms to a treatment providing either simplified information regarding the program or a combination of information and step-by-step application support. We find a significant treatment effect of simple information provision to firms on take up for the wage support program, but not for lines of credit. Our results constitute direct evidence that information frictions can act as a meaningful barrier to comprehensive distribution of firm-level support measures.

JEL Classification: G38, G41

Suggested Citation

Custodio, Claudia and Hansman, Chris and Mendes, Diogo, Information Frictions and Firm Take Up of Government Support: A Randomised Controlled Experiment (June 2021). CEPR Discussion Paper No. DP16216, Available at SSRN: https://ssrn.com/abstract=3886658

Claudia Custodio (Contact Author)

Imperial College London ( email )

South Kensington Campus
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London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Chris Hansman

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Diogo Mendes

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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