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The effects of small-firm loan guarantees in the UK: insights for the COVID-19 pandemic crisis

Gonzalez-Uribe, Juanita and Wang, Su (2020) The effects of small-firm loan guarantees in the UK: insights for the COVID-19 pandemic crisis. Financial Markets Group Discussion Papers (795). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

Loan guarantees are popular policy responses during the COVID-19 crisis. Despite their prevalence, evidence of their effectiveness is sparse. We estimate the impacts of UK guarantees during the Great Recession, by exploiting firm-size eligibility restrictions. Guarantees increased four-year performance, labour-productivity, and employment growth, but not investment. Results are driven by firms with high-training-costs employees. They are consistent with the guarantees enabling a small number of financially constrained firms to retain workers that helped rebuild the businesses post-crisis. The results suggest that COVID-19 responses based on guarantees alone can be regressive, because poorer workers are more likely to have low-training-costs jobs.

Item Type: Monograph (Discussion Paper)
Official URL: https://www.fmg.ac.uk/
Additional Information: © 2020 The Authors
Divisions: Finance
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
R Medicine > RA Public aspects of medicine > RA0421 Public health. Hygiene. Preventive Medicine
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
JEL classification: D - Microeconomics > D0 - General > D00 - General
D - Microeconomics > D2 - Production and Organizations > D20 - General
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H32 - Firm
H - Public Economics > H8 - Miscellaneous Issues > H81 - Governmental Loans, Loan Guarantees, and Credits
Date Deposited: 25 May 2023 08:54
Last Modified: 16 Sep 2023 00:00
URI: http://eprints.lse.ac.uk/id/eprint/118916

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