The Effects of Covid-related Business Subsidies in Finland

Olli Ropponen, Heli Koski, Otto Kässi, Nelli Valmari, Ilkka Ylhäinen and Johannes Hirvonen

No 145, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract This study examines the allocation of business subsidies introduced due to the COVID-19 pandemic to different types of companies. The results show that most of the supported companies would not have needed the subsidy, as they would have remained profitable also in the absence of it. Furthermore, companies incurring losses before the pandemic (zombie companies) received COVID-19 subsidies more often than other companies. The subsidies also directed more often to companies with productivity lower than the median productivity. The targeting of subsidies to low-productivity companies slows down future productivity development and economic growth, as labor and capital are more likely to remain in less productive businesses. The study also includes a literature review of the economic literature related to business subsidies during the COVID-19 pandemic.

Keywords: Corporate subsidies; Covid-19 pandemic; Subsidy allocation; Covid-subsidy literature (search for similar items in EconPapers)
JEL-codes: H22 H25 H32 (search for similar items in EconPapers)
Pages: 86 pages
Date: 2024-02-05
New Economics Papers: this item is included in nep-eur, nep-inv and nep-pbe
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