COVID-19 in Central America : effects of firm resilience and policy responses on employment

With data from the World Bank Enterprise Survey, this paper examines how firm-level resilience capabilities interact with government support in the reduction of lay-offs among formal firms in Central America. We estimate two latent variables to approximate resilience-related capabilities before (static) and after (dynamic) the COVID-19 pandemic. We create four counterfactual groups using a Markov chain Monte Carlo simulation to assess which resilience capabilities help firms cope better, with and without government support. We find that support policies play a marginal role among most groups, except in the dynamic resilient group, where receiving government support does shrink the probability of lay-offs.