DP16216 Information Frictions and Firm Take up of Government Support: A Randomised Controlled Experiment

Author(s): Cláudia Custódio, Christopher Hansman, Diogo Mendes
Publication Date: June 2021
Date Revised: June 2021
Keyword(s): COVID19, Information, SMEs, Take-up of government programs
JEL(s): G38, G41
Programme Areas: Public Economics, Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16216

This paper studies whether informational frictions prevent firms from accessing government support measures using an encouragement based randomized controlled trial. We focus on two COVID-19 relief programs for firms in Portugal. These programs provide (i) wage support for workers who are kept on payroll and (ii) lines of credit backed by government guarantees. We randomly assign firms to a treatment providing either simplified information regarding the program or a combination of information and step-by-step application support. We find a significant treatment effect of simple information provision to firms on take up for the wage support program, but not for lines of credit. Our results constitute direct evidence that information frictions can act as a meaningful barrier to comprehensive distribution of firm-level support measures.