Spatial interactions and micro-enterprises’ uptake of COVID-19 financial aid: Evidence from a spatial hurdle probit model

Abstract

This study examines the impact of spatial interactions on local government financial aid uptake among micro-enterprises (MEs) during the COVID-19 pandemic. While government support measures played a critical role in mitigating the crisis, the extent to which eligible firms applied for these benefits remains understudied. Using a representative survey of MEs in Trentino, Italy, linked to administrative data, we employ a spatial hurdle probit model to assess how information sharing among firms influences uptake decisions. Results show that MEs with similar levels of pre-pandemic economic performance in terms of added value tend to reciprocally influence each other in deciding to ask for public aid, with spatial interactions particularly significant in peripheral areas. Our findings highlight the importance of peer effects in shaping firms’ responses to public support measures, offering insights for policymakers aiming to improve the accessibility and effectiveness of financial aid programs.