28 June 2020

Understanding the impact of government aid to firms in the COVID-19 pandemic

Much of the economic turmoil caused by the COVID-19 pandemic is channelled through firms and their managers’ decisions. Responding to the pandemic, governments have closed non-essential workplaces and imposed social distancing measures while offering firms various forms of aid. Using firm-level survey data from Denmark, this column examines the impact of these measures on firms, and the uptake and effects of certain policy tools used in Denmark, which are similar to those used in many other countries. It shows that while most firms suffered pronounced revenue declines, targeted government policy helped many stay afloat, and created incentives for job retention.

Article in VOX EU by Morten Bennedsen, Niels Bohr Professor; Birthe Larsen, Associate Professor of Economics, Copenhagen Business School; Ian Schmutte, Associate Professor of Economics, Terry College of Business; and Daniela Scur, Assistant Professor of Strategy, SC Johnson College.

Read the full article here.