Government Support and Firm Performance during COVID-19
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Washington, DC: World Bank
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This paper assesses the medium-run
effects of government support to firms during the COVID-19
crisis and whether the effectiveness of this support varied
with its timing. Using data from three rounds of the World
Bank’s Enterprise Surveys COVID-19 Follow-up Surveys carried
out between May 2020 and April 2022, it relates government
support in Round 1 (received in the first half of 2020) and
Round 2 (received during the second half of 2020 or early
2021) with firm performance in Round 3 (generally mid-2021).
Controlling for a host of background characteristics, firms
that received support in Round 1 performed better in terms
of Round 3 sales, but only if they did not have continued
support. Firms that also received support in Round 2 had
similar Round 3 sales as those that received no support and
were more likely to decrease employment. Firms that received
government support only in Round 2 experienced no boost in
Round 3 performance. The findings suggest that government
support should be provided promptly, but it should also be
phased out quickly.