2022/20 | LEM Working Paper Series | ||||||||||||||||
The Zombification of the Economy? Assessing the Effectiveness of French Government Support During COVID-19 Lockdown |
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Mattia Guerini, Lionel Nesta, Xavier Ragot and Stefano Schiavo |
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Keywords | |||||||||||||||||
Covid-19; zombie firms; job-retention schemes; microsimulation; policy evaluation.
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JEL Classifications | |||||||||||||||||
H12, H32, J38, G33, L20
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Abstract | |||||||||||||||||
This paper evaluates the risk of zombification of the French economy during the
sanitary crisis, as a result of the unconditional financial support provided to firms
by public authorities. We develop a simple theoretical framework based on a partial-equilibrium model to simulate the liquidity and solvency stress faced by a large panel
of French firms and assess the impact of government support measures. Simulation
results suggest that those policies helped healthy but illiquid firms to withstand the
shock caused by the pandemic. Moreover, the analysis finds no evidence of a “zombification effect”, as government support has not disproportionately benefited less productive companies.
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