Firm closures during COVID-19: The importance of tailoring policy support to businesses

This paper evaluates whether COVID-19 government support reduced firm closures across Italian provinces from 2019 to 2022. Using monthly NUTS 3 data, we show that financial and fiscal support and job-retention schemes were associated with fewer firm exits, although effects varied across instruments and over time. Financial support was more effective in provinces with weaker entrepreneurial ecosystems, while job-retention schemes mattered more in stronger local contexts. Support was more effective in sectors most exposed to lockdown restrictions, and loan guarantees played a central role. The results highlight the importance of tailoring policy responses to local economic characteristics during crisis.