We consider Covid-19 financial support measures in the Netherlands, and relate it to the productivity of firms, their investment behavior and expectations, as well as to turnover, and firm exits. This analysis sheds light on both the short and potential longer term effects, by assessing the pre-pandemic, pandemic, and post-pandemic period. Using Unconditional Quantile Regression (UQR), we exploit the full distribution of TFP and investment. Our results suggest that the financial support has increased the chance of survival for firms, but arguably has reduced aggregate productivity by keeping alive the less viable firms, and supporting lower productive firms. Investments have been scaled back, regardless of receiving support, and investment expectations are also lower for those firms with support. Nevertheless, firms that are more productive and have invested more, are better able to survive a crisis independently. This is a strong message to policy makers and the business environment to remain focusing on improving firm productivity, so as to make our economy more resilient in the face of future crises.
Covid-19 financial support and firm’s productivity: Evidence from the Netherlands