The Zombification of the Economy? Assessing the Effectiveness of French Government Support During COVID-19 Lockdown

36 Pages Posted: 26 Jul 2022

See all articles by Mattia Guerini

Mattia Guerini

University of Brescia - Department of Economics and Management; GREDEG CNRS; Scuola Superiore Sant'Anna di Pisa

Lionel Nesta

GREDEG

Xavier Ragot

Sciences Po

Stefano Schiavo

University of Trento - Department of Economics and Management; OFCE

Date Written: 2022

Abstract

This paper evaluates the risk of zombification of the French economy during the sanitary crisis, as a result of the unconditional financial support provided to firms by public authorities. We develop a simple theoretical framework based on a partial-equilibrium model to simulate the liquidity and solvency stress faced by a large panel of French firms and assess the impact of government support measures. Simulation results suggest that those policies helped healthy but illiquid firms to withstand the shock caused by the pandemic. Moreover, the analysis finds no evidence of a “zombification effect”, as government support has not disproportionately benefited less productive companies.

Keywords: Covid-19, zombie firms, job-retention, schemes, microsimulation, policy evaluation

JEL Classification: H120, H320, J380, G330, L200

Suggested Citation

Guerini, Mattia and Nesta, Lionel and Ragot, Xavier and Schiavo, Stefano, The Zombification of the Economy? Assessing the Effectiveness of French Government Support During COVID-19 Lockdown (2022). CESifo Working Paper No. 9850, Available at SSRN: https://ssrn.com/abstract=4169384 or http://dx.doi.org/10.2139/ssrn.4169384

Mattia Guerini (Contact Author)

University of Brescia - Department of Economics and Management ( email )

Via S. Faustino 74/b
Brescia
Italy

GREDEG CNRS ( email )

Sophia-Antipolis
France

Scuola Superiore Sant'Anna di Pisa ( email )

Pisa, 56127
Italy

Lionel Nesta

GREDEG ( email )

France

Xavier Ragot

Sciences Po ( email )

28 Rue des Saint-Peres
Paris, Paris 75006
France

Stefano Schiavo

University of Trento - Department of Economics and Management ( email )

via Inama, 5
Trento, 38100
Italy

OFCE

Valbonne, 06560
France

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