This paper estimates the effectiveness of government support to the private sector during the COVID-19 pandemic in El Salvador and Georgia using firm-level data collected before and during the pandemic. The two countries are selected because eligibility criteria for support involved pre-pandemic features of firms, as opposed to more prevalent criteria directly linked to firms’ experiences during the pandemic and that greatly exacerbate concerns about selection bias in estimation. Four outcome variables are studied relating to firms’ workforce, hours of operations, and expectations. Matching and panel estimation techniques are used on full and restricted samples, with the latter aimed at reducing selection bias. Government support appears to have helped firms avoid a reduction in operations in El Salvador, mainly through cash transfers, which also helped in terms of permanent workers, with the latter effect counteracted by wage subsidies. Smaller firms in Georgia appear to have benefited more from government support, mostly through fiscal relief, which was partially counteracted by wage subsidies that benefited larger firms more. The finding that smaller firms have benefited more helps raise confidence in the analysis as strong negative selection bias is expected in this context. Manufacturers of textiles and garments in El Salvador and hotels and restaurants in Georgia appear to have benefited from government support, but the patterns in other sectors are mixed and country-specific, highlighting potential complexities of attempting to target sectors.
Details
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Author
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Document Date
2022/03/22
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Document Type
Policy Research Working Paper
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Report Number
WPS9980
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2022/03/22
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Disclosure Status
Disclosed
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Doc Name
Effectiveness of Government Support for the Private Sector during the COVID-19 Crisis : Evidence from El Salvador and Georgia
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Keywords
government support; limited capacity; hours of operation; propensity score matching; Global Indicator; access to finance; manufacturers of textile; lack of awareness; demand for product; country fixed effect; not statistically significant; private sector performance; average treatment effect; analysis of pattern; local government support; selection bias; support measure; wage subsidy; Wage Subsidies; Cash Transfer; temporary worker; panel regression; eligibility criterion; permanent worker; firm size; fiscal relief; labor productivity; estimation method; firm performance; summary statistic; matching method; application process; electricity outages; new credit; separate category; online business; causal link; explanatory variable; descriptive statistic; fiscal capacities; representative sample; treatment group; support policy; food manufacturer; Cash flow; low share
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Citation
Karalashvili,Nona Tamkoc,Mehmet Nazim
Effectiveness of Government Support for the Private Sector during the COVID-19 Crisis : Evidence from El Salvador and Georgia (English). Policy Research working paper,no. WPS 9980,COVID-19 (Coronavirus) Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/772451647971587082/Effectiveness-of-Government-Support-for-the-Private-Sector-during-the-COVID-19-Crisis-Evidence-from-El-Salvador-and-Georgia