Research / BFI Working PaperDec 02, 2021

Business Continuity Insurance in the Next Disaster

Samuel Hanson, Adi Sunderam, Eric Zwick

This article draws lessons from the business support policies pursued in the COVID-19 pandemic to guide policy design for the next disaster. We contrast the performance of the Paycheck Protection Program to the Main Street Lending Program to illustrate how design principles—targeting, repayment terms, and deployment through the banks versus government agencies—affect policy outcomes. We develop a framework for understanding why a novel business support policy could usefully complement traditional support programs. One surprising insight that emerges from this analysis is that many of the market failures used to justify support during the pandemic also arise in “garden-variety” recessions. Given our framework, the policy case for small business support during the recovery is considerably weaker than during the disaster, though credit policies that promote firm entry could aid the reallocation process.

This paper was prepared for the Economic Strategy Group at the Aspen Institute.

More Research From These Scholars

BFI Working Paper Jan 25, 2021

Rethinking How We Score Capital Gains Tax Reform

Natasha Sarin, Lawrence H. Summers, Owen M. Zidar, Eric Zwick
Topics:  Fiscal Studies
BFI Working Paper Jan 1, 2019

Capitalists in the Twenty-First Century

Matthew Smith, Danny Yagan, Owen M. Zidar, Eric Zwick
Topics:  Uncategorized
BFI Working Paper Oct 26, 2021

The Rise of Pass-Throughs and the Decline of the Labor Share

Matthew Smith, Danny Yagan, Owen M. Zidar, Eric Zwick
Topics:  Fiscal Studies