Affiliation:
1. Department of Economics Hong Kong University of Science and Technology Kowloon Hong Kong
2. Faculty of Economics Meiji Gakuin University Minato‐ku Japan
3. Munich Graduate School of Economics LMU Munich Munich Germany
4. Institute of Economic Research Hitotsubashi University Kunitachi Japan
Abstract
AbstractEvaluation of the impacts of government policies during an economic crisis is often delayed until the outcomes are realized. Policies can be better guided if they can be evaluated amid a crisis, before the realization of outcomes. This study examines whether survey data on the expectations of small business managers can help evaluate two high‐stake subsidies for firms amid the COVID‐19 crisis in Japan, namely, Subsidy Program for Sustaining Businesses (SPSB) and Employment Adjustment Subsidy (EAS). We evaluate the accuracy of managers' expectations, estimate the impact of subsidies on the expected firm survival, and compare it with the estimated impact on realized survival. We find that the managers' expectations on their future sales, survival rate, and the possibility of receiving these subsidies predict the realized outcomes, although they were highly pessimistic about their survival rates. We find that the estimated impacts of the SPSB on the expected survival rates have the same sign as the estimated impact on the realized survival rates, but the size is more than twice because of the pessimism on survival. The estimated impacts of the EAS are both insignificant. Therefore, although its impact may be overestimated, managers' expectations are useful for selecting an effective policy.
Funder
Japan Society for the Promotion of Science
Japan Securities Scholarship Foundation
Subject
Management of Technology and Innovation,Strategy and Management,Economics and Econometrics,General Business, Management and Accounting,Colloid and Surface Chemistry,Physical and Theoretical Chemistry