Daan Freeman, Leon Bettendorf, Yvonne Adema, 03 November 2021

As in most other countries, the government in the Netherlands implemented generous support measures for firms during the Covid-19 crisis. This column shows that unlike in other countries, however, government support disrupted the creative destruction process in the Netherlands by saving a disproportionately high number of low-productivity firms. The authors suggest this might be because the support measures were more widely and easily available. The speed of the phasing out will play an important role in determining how many firms that have been propped up fail once the support is removed or even has to be paid back.

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