Postdisaster Subsidies for Small and Medium Firms: Insights for Effective Targeting

Abstract

This paper examines the effect of capital subsidies after great disasters on the recovery of small and medium-sized enterprises (SMEs) using propensity score matching estimations. The estimates show that capital subsidies were effective for the recovery of the performance of SMEs in the retail sector. However, in manufacturing and other service sectors, it finds no significant difference between the recovery of SMEs with and without the subsidy. Utilizing firm-level supply chain data, it further explores the mechanism behind the heterogeneity across sectors. The results suggest that the heterogeneity comes from variations in the degree of private support across sectors rather than variations in supply chain disruption.