There is always a downside. Even for loan guarantee programs for small businesses, launched during financial crises to stave off the drying up of credit, particularly likely in periods of recession. It turns out these programs also have negative effects on the labor market, as is argued in the paper “The Labor Markets Effects of Loan Guarantee Programs,” co-written by Jean-Noel Barrot (HEC Paris), Thorsten Martin, Julien Sauvagnat (both at the Bocconi University, Milan) and Boris Vallee (Harvard Business School).
The dark side of loan guarantee programs for SMEs
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