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We study the effects of a unique lending program initiated by the Swedish government at the height of the financial crisis that allowed firms to suspend payment of all labor-related taxes and fees. Comprehensive administrative data on all Swedish firms show that firms borrowing from the program have higher rates of debt growth, investment spending, and employment growth compared to otherwise similar firms whose labor taxes were sufficiently low they could not benefit from the program. These results connect the availability of external credit with real activity in entrepreneurial firms in a way that has proved difficult in other settings.

In our article we consider insurance as a means of allocating terrorism risk. Terrorism poses a significant challenge for insurers worldwide. In terms of possible losses it fits into the same category as earthquakes and hurricanes. Yet as a result of the uncertainty surrounding these risks private markets face significant difficulties in providing insurance for it. In the insurance industry costly risk bearing can explain the supply of capacity risks. Corporate risk management theory provides reasons why transaction costs can motivate firms to purchase insurance. In the context of these tightly connected theories we derive models for both the supply of terrorism reinsurance and the demand for terrorism insurance. Using two datasets from the German terrorism insurer we estimate models on how corporations in Germany employ government sponsored insurance to manage their terrorism risk and on the factors that determine the supply for private market terrorism reinsurance.