Business Continuity Insurance in the Next Disaster

27 Pages Posted: 6 Dec 2021

See all articles by Samuel Gregory Hanson

Samuel Gregory Hanson

Harvard University - Business School (HBS)

Adi Sunderam

Harvard University - Business School (HBS)

Eric Zwick

University of Chicago - Finance

Date Written: December 2, 2021

Abstract

This article draws lessons from the business support policies pursued in the COVID-19 pandemic to guide policy design for the next disaster. We contrast the performance of the Paycheck Protection Program to the Main Street Lending Program to illustrate how design principles—targeting, repayment terms, and deployment through the banks versus government agencies—affect policy outcomes. We develop a framework for understanding why a novel business support policy could usefully complement traditional support programs. One surprising insight that emerges from this analysis is that many of the market failures used to justify support during the pandemic also arise in “garden-variety” recessions. Given our framework, the policy case for small business support during the recovery is considerably weaker than during the disaster, though credit policies that promote firm entry could aid the reallocation process.

Suggested Citation

Hanson, Samuel Gregory and Sunderam, Adi and Zwick, Eric, Business Continuity Insurance in the Next Disaster (December 2, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-143, Available at SSRN: https://ssrn.com/abstract=3976354 or http://dx.doi.org/10.2139/ssrn.3976354

Samuel Gregory Hanson

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Adi Sunderam

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Eric Zwick (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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