Firm Performance, Business Supports and Zombification over the Pandemic

Alexander Amundsen, Amélie Lafrance-Cooke and Danny Leung

No 2025/029, IMF Working Papers from International Monetary Fund

Abstract: Did the COVID-19 pandemic zombify the economy? Commentators have pointed to the pandemic and related business support measures potentially fueling zombification. Using administrative data covering the universe of Canadian firms, we find a broad-based decline in the share of zombie firms across industries relative to pre-pandemic levels. Whereas business support measures kept firms alive and operating as non-zombie firms, the decline in the zombie firm share was caused by would-be zombie firms exiting, indicative of the pandemic’s cleansing effects. As a consequence, while aggregate labour productivity worsened in Canada over the pandemic, it was not driven by zombie firms.

Keywords: Zombie Firms; Aggregate Productivity; COVID-19 Pandemic; zombie firm; business support measure; cleansing effect; firm performance; exit component; COVID-19; Productivity; Employment; Europe (search for similar items in EconPapers)
Pages: 40
Date: 2025-01-31
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