Contingent Impacts of COVID Relief Policies under the Supply Chain Shortage

This paper empirically investigates how governments’ COVID-19 relief policies affected firms in 14 post-communist economies under supply chain shortages between May 2020 and January 2022. We constructed a panel dataset with firms that were continuously observed in three rounds of the World Bank’s COVID-19 survey, using multiple variables, including difference-in-difference estimators, to comprehensively evaluate the dynamic changes in the firms’ supply chains, production, and finances. We further estimated the determinants of these changes, especially the roles played by the government. We found that: 1) reduced production capacity or reduced supply significantly increased the likelihood of reduced production and finances, whereas reduced demand had the opposite impact; 2) receiving support from the government augmented the impacts of affected production capacities and supply chains; 3) among firms with restricted capacity or supplies, receiving government support increased the likelihood of reduced production and finances; and 4) among firms with abundant capacity and supplies, receiving government support lowered the likelihood of reduced production and finances. Other variables, such as firms’ size, remote workforce, online businesses, and exports, also had significant influences.