The Zombification of the Economy? Assessing the Effectiveness of French Government Support during Covid-19 Lockdown

Mattia Guerini (1, 2) , Lionel Nesta (3) , Xavier Ragot (4) , Stefano Schiavo (5, 4)

1 UniBs - Università degli Studi di Brescia = University of Brescia
2 FEEM - Fondazione Eni Enrico Mattei [Milano]
3 GREDEG - Groupe de Recherche en Droit, Economie et Gestion
4 OFCE - Observatoire français des conjonctures économiques (Sciences Po)
5 UNITN - Università degli Studi di Trento = University of Trento

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.

Mots clés: Covid-19; zombie firms; job-retention; schemes; microsimulation; policy evaluation

Domaines: Economies et finances

Mattia Guerini, Lionel Nesta, Xavier Ragot, Stefano Schiavo. The Zombification of the Economy? Assessing the Effectiveness of French Government Support during Covid-19 Lockdown. Journal of Economic Behavior and Organization, 2024, 218, pp.263-280. ⟨10.1016/j.jebo.2023.12.013⟩. ⟨hal-04384037⟩