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Principles under pressure? A study of governmental crisis management

Post-it notes on window, saying "Sorry, we are closed" and "covid-19"
Photo: Anastasiia Chepinska

About the project

For the last 40 years, economic policy has been built around the principle that the welfare state should provide insurance to individuals – and not to firms – also in the time of recession. Since the beginning of the 1980s, advanced countries’ economic policy directed towards the business sector has in general been based on a principle of efficiency and competition rather than on intervention. Facing the Covid19 crisis these principles were largely disbanded.

Against this backdrop, we set out to address two important questions:

1. Is the Covid19 crisis different from other crises such that the policy-shift is warranted?

2. What were the effects of compensating economic policy measures?

Our research project grows out of an ambition that its’ insights will improve governmental capacity to handle future crises. While crises may differ, they have crucial aspects in common. They are often triggered by factors beyond the control of governments, but where government actions will determine how it evolves. While appropriate policies may mitigate a crisis, policy missteps may exacerbate it.

The two broad questions are assessed through seven work packages (WPs). The basis for the fundamental policy shift is addressed in WPs 1, 3, 5 and 6, whereas the second broad question, regarding effects the implemented policies, will be studied in WP 2, 3 and 4. Potential gains from improved information for decision making during a crisis will be studied in WP7. All WPs build on extensive use of detailed, linkable, micro data.

WP1: Covid19 - A Unicorn or just another slump? Firm dynamics and reallocation

WP2: The dilemmas of temporary layoff-schemes

WP3: Saving the right firms from bankruptcy? Targeted firm support schemes

WP4: Human capital investments during unemployment

WP5: Markets, price-setting and adaption to policy

WP6: Covid19 and the drop in sales: Regulations or adaptations, compliance and trust

WP7: Basis for decision making: Feasible vs actual information in real time

Objectives

- Provide new knowledge on the nature of economic crises, including similarities and differences across different downturns, and on which lessons that can be transferred from one crisis to another.

- Provide new knowledge on the effects of crisis policies on firms, workers and the economy at large, and investigate the scope for improved policy-design that would have allowed for faster and fairer crisis recovery.

- Analyze and discuss whether improved data and information would have allowed for more effective policies, in terms of efficiency and redistribution.

Financing

The project is funded by the Research Council of Norway under the FORSKER21 program with NOK 12 million over a six year period from August 2021 to July 2027.

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Publications

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Published June 28, 2021 2:56 PM - Last modified Oct. 18, 2021 12:31 PM