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Fiscal policy constraints and firm expectations
Initial registration date
July 04, 2020
July 08, 2020 5:13 PM EDT
University of Mannheim
Other Primary Investigator(s)
Additional Trial Information
In the first few months of 2020 the COVID-19 outbreak developed to an unprecedented pandemic. Governments were forced to implement drastic measures like physical distancing and travel bans to contain the disease. It became quickly clear that this situation has led to a major global economic downturn and as such not only a threat to lives but also to the means of living for many: In particular providers of personal services and owners of small businesses seem affected, though the extent of the disruptive economic impact of COVID-19 is not yet entirely clear. The main objectives of this project are to learn i) how effective government support for firms of different sizes and in different industries is, ii) which policies look most promising and are most urgently required for a quick recovery of the economy from the firms perspectives, and iii) to assess the longer-term prospects of firm behavior in domains like firm survival, investments, or labor demand. We evaluate strategies of firms to cope with the crisis and expectations about government interventions with focus on tax policy.
We implement a survey with a set of questions in the context of the COVID-19 crisis.
The survey includes two information experiments with four randomized treatment arms each.
Fiscal constraints experiment:
i) Control group: no information provided
ii) Fiscal constraint I: information about the cost of government intervention highlighting past examples of tax increases after economic crises and aim of German politicians to repay debts until 2030.
iii) Fiscal constraint II: same as Fiscal constraint I but with question on how justified government intervention is.
iv) Need for intervention: information about the cost of government intervention highlighting the deterioration of the economic situation of businesses.
All treatment information in this experiment are presented as text.
i) Control group: no information provided
ii) Optimistic outlook: information about an optimistic scenario published by the German Council of Economic Experts
iii) Pessimistic outlook: information about a pessimistic scenario published by the German Council of Economic Experts iv) Uncertain outlook: information about both the optimistic and the pessimistic scenarios published by the German Council of Economic Experts
All treatment information in this experiment are presented as text and figures.
Intervention Start Date
Intervention End Date
Primary Outcomes (end points)
i) expected changes in tax rates in the short run (next 12 months)
ii) expected changes in tax rates in the medium run (next 12-24 months)
iii) optimal tax rate from firm's perspective for government support of firms
iv) investment plans in the short run (next 12 month)
v) investment plans in the medium run (next 12-24 months)
vi) hiring plans in the short run (next 12 months)
vii) hiring plans in the medium run (next 12-24 months)
viii) expected survival of firms in the same industry
Primary Outcomes (explanation)
Our outcome variables are elicited through survey answers that follow the randomized survey experiment
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
See also "Interventions" described above.
The first information treatment targets directly expectations about future tax policy. We randomly assign 1/4 of the participants to receive information on the costs of the government intevention highlighting examples where tax increases followed economic crises and that German politicians aim to repay all debts by 2030, another 1/4 get the same information with an question on how justified this government intervention is. The next 1/4 of the participants receive information on the costs of the government support package, the deterioration of the economic situation of businesses and a question on how justified this government intervention is. The remainder 1/4 serves as control group.
Investment and hiring plans as well as expected firm survival depend not only on expected tax policy but also on uncertainty. We randomly assign 1/4 of the participants to receive information on an optimistic scenario for recovery taken from the German council of economic advisors, another 1/4 to a pessimistic scenario, and 1/4 to both the optimistic and the pessimistic scenarios. The remainder 1/4 serves as control group.
Experimental Design Details
Randomization is implemented via the survey software Qualtrics
Was the treatment clustered?
Sample size: planned number of clusters
The Treatments are not clustered. See below for the number of observed firms.
Sample size: planned number of observations
We approach approximately 600,000 firms and invite them to participate in our survey. We expect a response rate between 0.5 an 5%. For example, a response rate of 1% would imply that we have 6,000 independent firm-level observations.
Sample size (or number of clusters) by treatment arms
Even distribution of observations across the four treatment arms, respectively.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
INSTITUTIONAL REVIEW BOARDS (IRBs)