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Is small still beautiful? The recent economic and financial crisis has shown that developed countries in which firms are smaller suffered the biggest GDP plunges. Today, economic growth depends more than in the past on sound and well-organized firms, which means more innovation, a better educated labor force, higher likelihood of access to financial resources and efficient investments. This does not mean the end of small-sized firms, but that they need to be different from the way they were in the past. This book provides an international perspective on analyses and policy recommendations for how small businesses can reinforce their role in modern economies.

The real world is characterized by the presence of imperfections in goods, financial and labour markets. These imperfections have the potential to create links among those markets that differ in a relevant way from those outlined in the standard model. In financial markets, imperfections can alter the efficiency of the economy and thus cause unintended effects on goods and labour markets. Moreover, in the presence of market distortions, the interaction between policies and institutions becomes a critical aspect. This book, which brings together essays from distinguished scholars on this subject, provides new insights on how these imperfections affect the outcomes of real-world markets.

AbstractWe investigate how banks' internal ratings were affected by the first lockdown shock in Italy (March-June 2020). Using monthly proprietary data from a regional bank between October 2019 and January 2022, and adding credit registry data and balance sheet data of client firms, we estimate the lockdown effect on the change in six different ratings assigned by the bank to client firms in June 2020 and December 2020. We obtain three main results. First, controlling for both supply and demand factors, the lockdown is associated with a decline in four of the six ratings. Second, the lockdown effect also depends on specific firm characteristics, i.e. the lockdown effect appears to be mitigated in the presence of high turnover or for firms belonging to essential sectors. However, these interaction effects do not hold for all ratings, suggesting that each type of rating is influenced by different firm characteristics. Third, once we consider a full interaction model, the lockdown effect disappears in the medium term.