COVID-19 Pandemic, State Aid and Firm Productivity

73 Pages Posted: 18 Jan 2022

See all articles by Tommaso Bighelli

Tommaso Bighelli

Halle Institute for Economic Research

Tibor Lalinsky

National Bank of Slovakia

Juuso Vanhala

Bank of Finland

Date Written: January 14, 2022

Abstract

We study the consequences of the COVID-19 pandemic on productivity by matching firm performance outcomes with corresponding firm-level information on government support. Our cross-country evidence for five EU countries shows that the pandemic led to a significant short-term decline in productivity predominantly driven by the within-firm growth component. A thorough comparative analysis of the distribution of employment and overall direct subsidies, considering separately also relative firm-level support and the probability of being supported, reveals several common characteristics. In general, the pandemic support was distributed rather efficiently, i.e. towards “deserving” firms and only marginally towards “zombie” and non-viable firms. However, government subsidies appear to have had a limited effect on aggregate productivity developments.

Keywords: Covid-19, productivity, firm-level data, government support, employment subsidies, cross-country analysis

JEL Classification: D22, H25, J38, L29

Suggested Citation

Bighelli, Tommaso and Lalinsky, Tibor and Vanhala, Juuso, COVID-19 Pandemic, State Aid and Firm Productivity (January 14, 2022). Bank of Finland Research Discussion Paper No. 1/2022, Available at SSRN: https://ssrn.com/abstract=4009439 or http://dx.doi.org/10.2139/ssrn.4009439

Tommaso Bighelli

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Tibor Lalinsky (Contact Author)

National Bank of Slovakia ( email )

Imricha Karvasa 1
813 25 Bratislava
Slovakia

Juuso Vanhala

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

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