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Estimates of corporate cleansing during COVID-19 – using firm-level data to measure its productivity impact

Author

Listed:
  • Liza Archanskaia
  • Plamen Nikolov
  • Wouter Simons

Abstract

This section traces one of the channels through which the COVID-19 pandemic affects aggregate productivity – namely aggregate productivity changes linked to the exit of vulnerable firms (“cleansing” through firm exit). The impact of the exit margin on productivity is obtained by: (1) quantifying the impact of the pandemic on sales; (2) simulating the impact of this reduction in sales on firm-level accounts from the ORBIS database to identify financially vulnerable firms; (3) connecting financial vulnerability and pre-pandemic productivity. Our simulations suggest the pandemic would not induce additional cleansing effects as compared with a counterfactual no-COVID-19 scenario. The reason is that the COVID-19 shock adversely affected the financial health of not only low-productivity firms, but also high-productivity ones. These findings suggest that broad-based policy support implemented in connection with the pandemic did not imply foregone productivity growth through the exit margin.

Suggested Citation

  • Liza Archanskaia & Plamen Nikolov & Wouter Simons, 2022. "Estimates of corporate cleansing during COVID-19 – using firm-level data to measure its productivity impact," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 21(2), pages 7-18, July.
    • Handle: RePEc:euf:qreuro:0212-01
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    File URL: https://economy-finance.ec.europa.eu/publications/quarterly-report-euro-area-qrea-vol-21-no-2-2022_en
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