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Mr. Qitong Wang
PhD Candidate in Economics
University of Southern California

I develop a quantitative framework to study the effect of a direct subsidy program for firms in an environment featuring a production network and entrepreneurship. The combination of a network structure and sectoral financial constraints can propagate shocks from upstream to downstream and affect the transition path of the aggregate economy. Quantitatively, the recent firm subsidy program during COVID-19 increased aggregate consumption and induced excessive firm creation. Redesigning the distribution of funds across sectors could lead to improvements in aggregate outcomes.