Seminari - Amedeo Pugliese

Amedeo Pugliese (University of Padova) will present his paper “Strategically Small Firms and the Effects of Public Grants During Crisis,” along with Mircea Epure (UPF) and Ozan Güler (CUNEF). 

Abstract

We investigate whether strategically small firms that avoid surpassing sizedependent regulations in non-crisis periods may have benefited more from public resources during the COVID-19 crisis. We define as strategically small the firms positioning themselves below two thresholds: (i) e6 million revenues, implying less stringent tax and its oversight, or (ii) 50 employees, benefiting from looser labor laws and lower disclosure requirements. We first document systematic firms’ bunching below the revenues and employees thresholds, suggesting that these regulations may discourage firm growth. We do not observe similar behaviors at other disclosure and auditing thresholds. We then show that these firms were more likely to obtain public funding during the crisis, relative to firms just above the thresholds. Despite accessing more public resources, strategically small firms exhibit similar or lower growth and performance than their counterparts during and after the crisis. Overall, we document that size-dependent regulations affect firms’ behavior in good times and have unintended effects on public resource allocation in crisis times.