Discussion paper

DP15834 Will Schumpeter Catch Covid-19?

We estimate the factors predicting firm failures in the COVID crisis based on French data in 2020. Although the number of firms filling for bankruptcy was much below its normal level (- 36% compared to 2019) the same factors that predicted firm failures (primarily productivity and debt) in 2019 are at work in a similar way as in 2020. Hence, the selection process, although much reduced, has not been distorted in 2020. At this stage, partial hibernation rather than zombification characterises the selection into firm survival or failure. We also find that the sectoral heterogeneity of the turnover COVID shock (proxied by the change in credit card transactions) has been largely (but not fully) absorbed by public policy support because it predicts little of the probability of bankruptcy at the firm level. Finally, we sketch some potential scenarios for 2021-2022 for different sectors based on our empirical estimates of predictors of firm failures.


Cros, M, A Epaulard and P Martin (2021), ‘DP15834 Will Schumpeter Catch Covid-19?‘, CEPR Discussion Paper No. 15834. CEPR Press, Paris & London. https://cepr.org/publications/dp15834