On the cleansing effect of recessions and government policy: evidence from Covid-19

Nicholas Kozeniauskas; Pedro Moreira; Cezar Santos

doi:10.1016/j.euroecorev.2022.104097

On the cleansing effect of recessions and government policy: evidence from Covid-19

Nicholas Kozeniauskas^*, Pedro Moreira, Cezar Santos

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

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Abstract

Recessions can have a cleansing effect by encouraging the reallocation of resources from low-productivity firms towards higher-productivity ones. Whether this effect actually occurs is still debated. We contribute to answering this question by providing new evidence. Using a survey of firms matched with administrative data, we trace out the Covid-19 recession's effects across the productivity distribution. Higher-productivity firms are found to have been more successful at maintaining employment, but there was not a rise in exit amongst lower-productivity firms. In line with the theory that support policies offset the cleansing effect of recessions, high-productivity firms are also found to have been less likely to take up government support.

Original language	English
Article number	104097
Number of pages	23
Journal	European Economic Review
Volume	144
DOIs	https://doi.org/10.1016/j.euroecorev.2022.104097
Publication status	Published - May 2022

Keywords

Cleansing effect
Covid-19
Firms
Policies
Productivity

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.euroecorev.2022.104097Licence: CC BY-NC-ND

43960760Final published version, 1.14 MBLicence: CC BY-NC-ND

http://hdl.handle.net/10400.14/37765Licence: CC BY-NC-ND

Cite this

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abstract = "Recessions can have a cleansing effect by encouraging the reallocation of resources from low-productivity firms towards higher-productivity ones. Whether this effect actually occurs is still debated. We contribute to answering this question by providing new evidence. Using a survey of firms matched with administrative data, we trace out the Covid-19 recession's effects across the productivity distribution. Higher-productivity firms are found to have been more successful at maintaining employment, but there was not a rise in exit amongst lower-productivity firms. In line with the theory that support policies offset the cleansing effect of recessions, high-productivity firms are also found to have been less likely to take up government support.",

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On the cleansing effect of recessions and government policy: evidence from Covid-19

Abstract

Keywords

UN SDGs

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CUBE: Católica Lisbon Research Unit in Business and Economics

Cite this

On the cleansing effect of recessions and government policy: evidence from Covid-19

Abstract

Keywords

UN SDGs

Access to Document

Other files and links

Fingerprint

Projects

CUBE: Católica Lisbon Research Unit in Business and Economics

Cite this