Effects of COVID-19 related government response stringency and support policies: Evidence from European firms.

In this paper we employ survey information on more than 10,000 Southern and Eastern European firms to assess the effects of the COVID-19 related lockdown and government support policies on the business operations of enterprises. Our findings reveal considerable size- and sector-related heterogeneity, with small firms, and firms such as hotels and restaurants operating in the facilities sector reporting the largest losses in terms of sales when governments increase the strictness of confinement measures. Fixed effects regression estimates suggest that a complete lockdown results in an average year-on-year sales growth that is approximately 63 percentage points lower than it would be without any curtailment measures. The magnitude of the coefficient on year-on-year sales change for a complete lockdown is 14 percentage points higher for small compared to large enterprises. Furthermore, our results suggest that state aid in the form of deferral of payments or wage subsidies are associated with firms' labor market and financial outcomes in times of crisis. For instance, deferrals of payments are linked to between 0.7 and 1.5 fewer layoffs per firm in the surveyed enterprises compared to other types of support.