Browsing by Subject "http://www.yso.fi/onto/yso/p28266"

Abstract Faculty: Social Sciences Program: Economics Line of study: General line Author: Juho Ivaska Name of work: Mitigating the Covid-19 shock – A simulation study on the cost compensation schemes of Finland, Norway and the United States Type of work: Master’s thesis Month and year: 11/2021 Number of pages: 43 Keywords: Corporate subsidies, Covid-19, Simulation Storage location: University of Helsinki library Abstract: During the Covid-19 pandemic, many countries implemented sizeable support programs for companies suffering from the pandemic. This thesis compares the effectiveness of the Business Cost Support of Finland, the Norwegian Business Compensation Scheme and the Paycheck Protection Program (PPP) of the USA in terms of mitigating pandemic effects on firm profitability, liquidity and solvency. All three programs are cost support schemes but they differ in what costs are covered and in their eligibility criteria. The comparison is executed by simulating the pandemic-induced turnover shock on Finnish enterprises under each support scheme. Statistics Finland’s detailed Financial statement data from 2019 provides the starting position for the simulation. The turnover shock is one year of length and assigned to firms based on their industry code. Effectiveness of the support schemes is measured by mitigation rate which describes the share of the effects of the pandemic that the scheme can mitigate. Additionally, the costs of the schemes are considered. This thesis finds that the Norwegian scheme was the most effective in decreasing the number of unprofitable firms as well as the number of firms with liquidity troubles. It ranks the highest in all but one measure even when adjusted by its second highest price. The Finnish scheme yielded the highest price-adjusted mitigation rate in average quick ratio but trailed the Norwegian scheme slightly in all other categories. The PPP was the most expensive of the support schemes and thus the least effective in all the profit and liquidity related measures. This thesis concludes that compensating fixed costs and targeting the support carefully were crucial in supporting the worst hit businesses for a reasonable price. The Finnish Business Cost Support fared well compared to its counterparts but allowing for higher and lower single support payments would have most likely increased its effectiveness. If the target of the scheme is maintaining employees on firm payrolls, a pure wage compensation scheme as the PPP yields better results.