Covid-19 Financial Support to Small Businesses in Switzerland: Evaluation and Outlook

Marius Brülhart (marius.brulhart@unil.ch), Rafael Lalive, Tobias Lehmann (tobias.lehmann.1@unil.ch) and Michael Siegenthaler
Additional contact information
Marius Brülhart: Department of Economics, HEC Lausanne, University of Lausanne, https://www.unil.ch/de/en/home.html
Tobias Lehmann: Department of Economics, HEC Lausanne, University of Lausanne, Switzerland, https://www.unil.ch/de/en/home.html
Authors registered in the RePEc Author Service: Marius Brülhart

No 20-483, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: What determines small businesses’ recourse to public support measures during the Covid-19 crisis? We analyse this question using a survey of 1,011 self-employed workers and small business owners in Switzerland, linked to information pre-dating the crisis. We find that “objective†measures of lockdown affectedness and economic structure explain fairly well how businesses availed of support measures to cover labour costs. Recourse to government-backed Corona loans, however, is less well explained by objective characteristics and appears to be driven to a larger degree by behavioural idiosyncrasies across firms. Specifically, previously indebted businesses took out Corona loans more readily than those who had been debt-free before the pandemic. Since Corona uptake is not well in line with firm fundamentals, we propose making loan repayments contingent on future profits. This will more effectively target and sustain businesses that are in trouble today but would be viable in the absence Covid-19. Looking ahead, we also suggest that public support measures should gradually switch from “freezing†the economy towards facilitating structural reallocation. Support to firms whose activity continues to be constrained by the pandemic should be gradually lowered.

Keywords: Corona (search for similar items in EconPapers)
Pages: 17 pages
Date: 2020-06
New Economics Papers: this item is included in nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: COVID-19 financial support to small businesses in Switzerland: evaluation and outlook (2020)
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