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Business Finland COVID-19 Support Funding – What Was Achieved, and at What Cost?

Author

Listed:
  • Hirvonen, Johannes
  • Kässi, Otto
  • Ropponen, Olli

Abstract

This paper examines the labour market impacts of Finland’s initial COVID-19 subsidy program, designed to mitigate the economic fallout of the pandemic. Utilising a novel and comprehensive dataset and a judge-leniency instrumental variables design, we analyse the effects of these subsidies at both the firm and worker levels. Our findings reveal nuanced effects: the program increased the wage sum in the treated firms and decreased the risk of unemployment. On the other hand, the subsidies reduced labour productivity in treated firms, potentially hindering creative destruction. At the worker level, subsidised employees fared better in subsequent years than their non-subsidised counterparts, with slight increases in annual salaries and a higher likelihood of being employed. However, these workers were more likely to be employed in lower-productivity firms. See also Etla Working Paper No 111 Jobs, Workers, and Firms: Dissecting the Labour Market Effects of Finland’s COVID-19 Subsidy Program.

Suggested Citation

  • Hirvonen, Johannes & Kässi, Otto & Ropponen, Olli, 2023. "Business Finland COVID-19 Support Funding – What Was Achieved, and at What Cost?," ETLA Brief 131, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:briefs:131
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    More about this item

    Keywords

    Business Finland COVID-19 business development support; Crisis subsidies; COVID-19; Productivity; Unemployment;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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