Negative economic shocks have been found to propagate through input-output linkages to both upstream and downstream firms, leading to a substantial effect on the entire economy (Acemoglu et al.

The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

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)