Loans vs Subsidies: Lithuania's State Support Policies During the COVID-19 Pandemic

Mustapha Douch (), Egle Jakucionyte and Swapnil Singh ()
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Mustapha Douch: University of Edinburgh
Swapnil Singh: Bank of Lithuania and Kaunas University of Technology

No 36, Bank of Lithuania Discussion Paper Series from Bank of Lithuania

Abstract: This paper analyzes the firm's choice between subsidy support and loan support during the COVID-19 crisis and explores the implications of this choice on firms' employment growth. We compile a novel micro-level dataset of Lithuanian firms' balance sheet data and government support records during the pandemic period. We use the dataset to provide a set of stylized facts, categorizing the variety of enacted support policies and tracking aid distribution patterns. We show that larger firms were more likely to choose loans over subsidies. This result cannot be fully explained by policy eligibility criteria and the severity of the pandemic shock, suggesting that firm characteristics played a significant role. Finally, we show that the type of support has implications for firms' outcomes – subsidy-recipient firms experienced higher employment growth compared to loan-recipient firms.

Pages: 74 pages
Date: 2024-01-24
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