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Covid-19 Financial Support to Small Businesses in Switzerland: Evaluation and Outlook

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Abstract

What determines small businesses’ recourse to public support measures during the Covid-19 crisis? We analyse this question using a survey of 1,011 self-employed workers and small business owners in Switzerland, linked to information pre-dating the crisis. We find that “objective†measures of lockdown affectedness and economic structure explain fairly well how businesses availed of support measures to cover labour costs. Recourse to government-backed Corona loans, however, is less well explained by objective characteristics and appears to be driven to a larger degree by behavioural idiosyncrasies across firms. Specifically, previously indebted businesses took out Corona loans more readily than those who had been debt-free before the pandemic. Since Corona uptake is not well in line with firm fundamentals, we propose making loan repayments contingent on future profits. This will more effectively target and sustain businesses that are in trouble today but would be viable in the absence Covid-19. Looking ahead, we also suggest that public support measures should gradually switch from “freezing†the economy towards facilitating structural reallocation. Support to firms whose activity continues to be constrained by the pandemic should be gradually lowered.

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  • Marius Brülhart & Rafael Lalive & Tobias Lehmann & Michael Siegenthaler, 2020. "Covid-19 Financial Support to Small Businesses in Switzerland: Evaluation and Outlook," KOF Working papers 20-483, KOF Swiss Economic Institute, ETH Zurich.
    • Handle: RePEc:kof:wpskof:20-483
    DOI: 10.3929/ethz-b-000424045
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    1. Sylvia Kaufmann, 2022. "Covid-19 outbreak and beyond: A retrospect on the information content of registered short-time workers for GDP now- and forecasting," Working Papers 22.02, Swiss National Bank, Study Center Gerzensee.
    2. Ambika Zutshi & John Mendy & Gagan Deep Sharma & Asha Thomas & Tapan Sarker, 2021. "From Challenges to Creativity: Enhancing SMEs’ Resilience in the Context of COVID-19," Sustainability, MDPI, vol. 13(12), pages 1-16, June.
    3. Lucia Svabova & Katarina Kramarova & Dominika Chabadova, 2022. "Impact of the COVID-19 Pandemic on the Business Environment in Slovakia," Economies, MDPI, vol. 10(10), pages 1-22, October.
    4. Sylvia Kaufmann, 2023. "Covid-19 outbreak and beyond: a retrospect on the information content of short-time workers for GDP now- and forecasting," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 159(1), pages 1-10, December.
    5. Lucas Marc Fuhrer & Marc-Antoine Ramelet & Jörn Tenhofen, 2021. "Firms’ participation in the Swiss COVID-19 loan programme," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 157(1), pages 1-22, December.
    6. Benedikt Janzen & Doina Maria Radulescu, 2021. "Effects of Covid-19 Related Government Response Stringency and Support Policies: Evidence from European Firms," CESifo Working Paper Series 9116, CESifo.
    7. Florian Eckert & Heiner Mikosch, 2022. "Firm bankruptcies and start-up activity in Switzerland during the COVID-19 crisis," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-25, December.
    8. Monika Bütler, 2022. "Economics and economists during the COVID-19 pandemic: a personal view," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-15, December.
    9. Janzen, Benedikt & Radulescu, Doina, 2022. "Effects of COVID-19 related government response stringency and support policies: Evidence from European firms," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 129-145.

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