Did COVID-19 grants support tourism firms in securing survival and employment? Evidence from Croatia

Abstract

This study is one of first large scale evaluations of the impact of government subsidies for tourism firms during the COVID-19 pandemic. We use the population of micro, small, and medium sized tourism enterprises from Croatia, one of the most tourism-intensive European economies, to investigate whether receipt and the size of subsidies helped distressed companies to stay in business and retain their employees during the first two years of the pandemic. In this study, a novel perspective of grant size effect is introduced to examine the effect of public stimuli on the tourism industry. Positive effects of support on firm survival and employment of subsidised firms are inversely proportional to the size of support. Thus, the findings indicate the need for a dynamic and nuanced approach to public support that considers firms’ heterogeneity in the tourism sector. This study could help policymakers manage potential future crises more effectively.