Effects of short-time work schemes on firm survival during the covid-19 crisis: insights from new Spanish data

This paper explores the effect of Short-time Work Schemes (STW) on firm survival, analysing aggregated survival rates in a large cohort of more than a million employers followed during the onset of the COVID-19 pandemic in Spain. These public schemes were widely used during the pandemic and temporarily subsidized employees' wages, relieving labour downsizing costs to the employers. We apply fractional regression methods to this novel database that links STW take-up with firm survival rates from administrative sources. Our results suggest a positive association between firm survival and the STW take-up of their employees. We argue this effect, although not causal, informs of a lower bound with selection bias likely operating in the opposite direction, since a priori vulnerable firms are more likely to adopt the scheme. We also argue that this more intensive use may drive the heterogeneous results which pointed at stronger effects on vulnerable sectors and smaller firms.