German Real Estate Prices and Rents Across Space and Time

Projekt Start:01/2019
Forscher:Leo Kaas, Georgi Kocharkov, Philipp Marek, Nicolas Syrichas
Bereich: Macro Finance
Finanziert von:LOEWE

Topic and Objectives

While the COVID-19 pandemic had a large and asymmetric impact on firms, many countries quickly enacted massive business rescue programs which are specifically targeted to smaller firms. Little is known about the effects of such policies on business entry and exit, factor reallocation, and macroeconomic outcomes. This paper builds a general equilibrium model with heterogeneous and financially constrained firms in order to evaluate the short- and long-term consequences of small firm rescue programs in a pandemic recession. We calibrate the stationary equilibrium and the pandemic shock to the U.S. economy, taking into account the factual Paycheck Protection Program (PPP) as a specific grant policy. We find that the policy has only a small impact on aggregate employment because (i) jobs are saved predominately in less productive firms that account for a small share of employment and (ii) the grant induces a reallocation of resources away from larger and less impacted firms. Much of this reallocation happens in the aftermath of the pandemic episode. While a universal grant reduces the firm exit rate substantially, a targeted policy is not only more cost-effective, it also largely prevents the creation of “zombie firms" whose survival is socially inefficient.

Zugehörige publizierte Papers

Alessandro Di Nola, Leo Kaas, Haomin WangRescue Policies for Small Businesses in the COVID-19 Recession
Review of Economic Dynamics
2023 Macro Finance

Zugehörige Working Papers

343Alessandro Di Nola, Leo Kaas, Haomin WangRescue Policies for Small Businesses in the COVID-19 Recession2022 Macro Finance