The Impact of the COVID-19 Job Retention Support on Employment

The paper studies the employment effects of the widespread job retention support that was provided during the Covid-19 pandemic, using firm-level administrative data for Estonia that cover the whole population of firms in 2019-2020. The endogeneity of the support is addressed by creating a control group from firms that were as severely hit as those that received the support and by using matching techniques. It is found that there was no selection of firms into the support by productivity once the sample is restricted to firms that experienced similar adverse conditions. The support had a positive effect on employment, as about one job in five that was supported by the scheme was saved and the unemployment rate was 2–4 percentage points lower in 2020 with the support than it would have been without the support