This study evaluates the impact of “group subsidies,” a policy intervention intended to repair and reinstall damaged capital goods and facilities of small- and medium-sized enterprises after the Great East Japan earthquake. Employing a propensity-score-matching and difference-in-differences approach, we find a positive effect of the subsidies on post-disaster sales and employment of small recipient firms. We also find a positive indirect effect of group subsidies on firms in disaster-hit prefectures that did not receive any group subsidy but were linked through supply chains with a recipient firm. Our results indicate the propagation of post-disaster policy effects through supply chains. (JEL H20, L14, Q54).
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