Wang, Tianxi and Wang, Xuan (2024) Designing Public Support for SMEs during Crises: The Role of Private Bank Lending. Working Paper. SSRN.
Wang, Tianxi and Wang, Xuan (2024) Designing Public Support for SMEs during Crises: The Role of Private Bank Lending. Working Paper. SSRN.
Wang, Tianxi and Wang, Xuan (2024) Designing Public Support for SMEs during Crises: The Role of Private Bank Lending. Working Paper. SSRN.
Abstract
When designing crisis support schemes for SMEs, governments grapple with adverse selection problems. We show how governments can improve policy targeting by partnering with private banks that have no superior information on SME types. The mechanism utilises SMEs' loan demand information and external financing being more costly than internal financing. If policy aims at employment protection, optimal partnership fully subsidises funding costs of only those SMEs with sufficiently low loan per worker. If policy aims at efficiency, the partnership targets SMEs with sufficiently high loan demand. We estimate our design could save at least 16% more jobs than the UK Bounce-Back Loan scheme while significantly reducing costs to taxpayers.
Item Type: | Monograph (Working Paper) |
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Uncontrolled Keywords: | public crisis intervention, adverse selection, small and medium-sized enterprises, employment protection, public-private partnership |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Economics, Department of |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 17 Jan 2025 15:34 |
Last Modified: | 17 Jan 2025 15:34 |
URI: | http://repository.essex.ac.uk/id/eprint/35226 |
Available files
Filename: ssrn-3961464.pdf