Publication

Zombification of the economy? Assessing the effectiveness of French government support during COVID-19 lockdown

COVID-19
Zombie firms
Job-retention schemes
Microsimulation
Policy evaluation
2024
M. GUERINI ,
X. RAGOT ,
S. SCHIAVO

2024, Journal of Economic Behavior and Organization, 218, pp.263-280

Abstract

This paper evaluates the risk of zombification of the French economy during the COVID-19 pandemic crisis, as a result of the unconditional financial support provided to firms by public authorities, to limit the impact of lockdown measures. We develop a simple theoretical framework based on a partial-equilibrium model to simulate the liquidity and solvency stress faced by a large panel of French firms and assess the impact of government support. Simulation results suggest that those policies helped healthy but illiquid firms to withstand the shock caused by the pandemic. Moreover, the analysis finds no evidence of a “zombification effect”, as less productive companies did not disproportionately benefit from government support.