Covid-19 in Central America: firm resilience and policy responses on employment

Beatriz Calzada Olvera*, Mario González Sauri, David-Alexander Harings Moya, Federico Louvin

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper examines how government support interacts with firm-level resilience capabilities in the reduction of layoffs among formal firms in Central America. Our analysis suggests that government support measures play a role in reducing the probability of layoffs among firms with only dynamic resilience capabilities (i.e., those that are developed after the pandemic onset). The effect of government support is not statistically different from the effect of static resilience capabilities alone (i.e., those that were present before the pandemic); thus, in firms with such capabilities, the effect of government support will be marginal. These results hold across sectors - exhibiting a marginally higher treatment effect in service sectors. Our results do not imply that Covid-19 supportive measures are to be disregarded, but instead raise the question of how government support policies could improve the allocation of support among firms in times of crises. Moreover, it underlines the necessity of policies that enhance resilience more broadly – a task that hints at structural issues and requires continuous government support in lieu of ad-hoc measures.
Original languageEnglish
Pages (from-to)1280-1295
Number of pages16
JournalJournal of Policy Modeling
Volume44
Issue number6
DOIs
Publication statusPublished - 19 Nov 2022

JEL classifications

  • l25 - Firm Performance: Size, Diversification, and Scope
  • d01 - Microeconomic Behavior: Underlying Principles
  • c63 - "Computational Techniques; Simulation Modeling"
  • o30 - "Technological Change; Research and Development; Intellectual Property Rights: General"
  • o31 - Innovation and Invention: Processes and Incentives

Keywords

  • firm capabilities
  • resilience
  • innovation
  • government support

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