Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248781 
Year of Publication: 
2021
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2021-097/IV
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
When designing schemes to help SMEs survive crises, the government typically faces asymmetric information, so that it cannot target the SMEs most worth saving. We show that the government can exploit the information in the borrower loan demand to improve policy targets compared with existing programmes. If the aim is employment protection, optimal policy should fully subsidise the funding cost of only those SMEs whose loan size is below a threshold. If the aim is economic efficiency, the government should target SMEs whose loan size is above a threshold. In general, public policy should utilise private sectors' information and expertise.
Subjects: 
pandemic crisis
bank lending
unemployment
information asymmetry
small and medium-sized enterprises
JEL: 
G21
G38
D82
H81
Document Type: 
Working Paper

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