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Major Issues in Categorizing Small Businesses: Supporting Small Businesses through Improved Categorization

Eunsun Gil ()
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Eunsun Gil: Korea Institute for Industrial Economics and Trade, Postal: Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea, http://www.kiet.re.kr

No 21/2, i-KIET Issues and Analysis from Korea Institute for Industrial Economics and Trade

Abstract: The Korean government is considering providing a fourth round of disaster relief funding to support small businesses hard-hit by the prolonged social distancing measures implemented to contain the spread of COVID-19. However, determining which businesses should benefit from this support is quite tricky. Legal business entities such as microenterprises and privately-owned companies are not the same as struggling, self-employed small businesses. During the second and third rounds of support, only privately-owned microenterprises were eligible for relief. The amount of financial support available varied depending on whether businesses were ordered to limit the number of customers, had restrictions placed on business hours, or suffered losses in revenue. Small business establishments categorized neither as microenterprises nor as privately-owned companies have been excluded from receiving support, regardless of the economic hardship they face. Moreover, privately-owned microenterprises (many of which are far from being small businesses with narrow operating margins) are not excluded from receiving support. This paper explores proposals for policy that would address these issues to ensure greater equity in COVID-19 disaster relief.

Keywords: COVID-19; Korea; subsidies; subsidy policy; support policy; small businesses; SMEs; small and medium-sized enterprises; policy support; disaster relief; disaster relief policy; stimulus policy; disaster aid; COVID-19 relief; bailouts; credits; loan guarantees; government loans (search for similar items in EconPapers)
JEL-codes: H12 H20 H25 H81 H84 L50 L53 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2021-02-19
New Economics Papers: this item is included in nep-mfd, nep-pbe and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kietia:2021_002

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