The Relevance of Cost Structure for the Effectiveness of Governmental Aid Programs

The COVID-19 crisis has caused persistent revenue declines for many firms, resulting in acute liquidity needs unless ongoing costs are reduced. Using new data from the German Business Panel, a classification approach is applied to reveal firms’ cost structures and, consequently, their sensitivity to revenue shocks. This information is valuable for designing effective support measures that safeguard employment, prevent both insolvencies and delayed insolvency filings, account for sector-specific conditions, and accelerate economic recovery.

Wirtschaftsdienst, 101(7)