Were Small Businesses More Likely to Permanently Close in the Pandemic?

Fairlie, Robert W.; Fossen, Frank M.; Johnsen, Reid; Droboniku, Gentian

doi:10.2139/ssrn.4178921

Cited by 2 publications

(3 citation statements)

References 4 publications

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“…36 Moreover, and perhaps surprisingly, the cumulative rate of closings one year after the start of the pandemic is only about 2 percentage points higher than the cumulative closing rate from mid-February 2019 to mid-February 2020. This implies, perhaps surprisingly but consistent with concurrent analysis by Crane et al (2022) based on alternative measures of business closures as well as Decker and Haltiwanger (2022) and Fairlie et al (2022) based on more recently released administrative data, that the pandemic did not lead to more permanent small business closings.…”

Section: The Crucial Role Of Small Business Closings and Openingssupporting

confidence: 72%

“…In the months thereafter, about two thirds of closed businesses reopened, resulting in a cumulative closing rate in the four sectors of 17% one year after the start of the pandemic. This is only about two percentage points higher than the cumulative closing rate over the same time period one year prior, which implies, perhaps surprisingly but consistent with concurrent analysis by Crane et al (2022) based on alternative measures of business closures as well as Decker and Haltiwanger (2022) and Fairlie et al (2022) based on more recently released administrative data, that the pandemic has not led to a substantially higher rate of permanent shutdowns. 3 Third, new businesses openings in the four sectors considered have added more than 1.5 million new jobs since the pandemic started, constituting an important driver of the recovery from mid-June 2020 onward.…”

Section: Introductionsupporting

confidence: 68%

“…A related set of studies focuses explicitly on employment changes of smaller businesses; e.g. , Dalton et al (2020), Fairlie (2020), Fairlie et al (2022), or the Small Business Pulse Survey by the U.S. Census Bureau.…”

Section: Introductionmentioning

confidence: 99%

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Measuring Small Business Dynamics and Employment with Private-Sector Real-Time Data

Kurmann

Lalé

2022

SSRN Journal

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Section: The Crucial Role Of Small Business Closings and Openingssupporting

confidence: 72%

Section: Introductionsupporting

confidence: 68%

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Measuring Small Business Dynamics and Employment with Private-Sector Real-Time Data

Kurmann

Lalé

2022

SSRN Journal

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Measuring Small Business Dynamics and Employment with Private-Sector Real-Time Data

Kurmann¹,

Lalé²,

Ta³

2022

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The COVID-19 pandemic has led to an explosion of research using private-sector datasets to measure business dynamics and employment in real-time. Yet questions remain about the representativeness of these datasets and how to distinguish business openings and closings from sample churn – i.e., sample entry of already operating businesses and sample exits of businesses that continue operating. This paper proposes new methods to address these issues and applies them to the case of Homebase, a real-time dataset of mostly small service-sector sector businesses that has been used extensively in the literature to study the effects of the pandemic. We match the Homebase establishment records with information on business activity from Safegraph, Google, and Facebook to assess the representativeness of the data and to estimate the probability of business closings and openings among sample exits and entries. We then exploit the high frequency / geographic detail of the data to study whether small service-sector businesses have been hit harder by the pandemic than larger firms, and the extent to which the Paycheck Protection Program (PPP) helped small businesses keep their workforce employed. We find that our real-time estimates of small business dynamics and employment during the pandemic are remarkably representative and closely fit population counterparts from administrative data that have recently become available. Distinguishing business closings and openings from sample churn is critical for these results. We also find that while employment by small businesses contracted more severely in the beginning of the pandemic than employment of larger businesses, it also recovered more strongly thereafter. In turn, our estimates suggests that the rapid rollout of PPP loans significantly mitigated the negative employment effects of the pandemic. Business closings and openings are a key driver for both results, thus underlining the importance of properly correcting for sample churn.

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Were Small Businesses More Likely to Permanently Close in the Pandemic?

Cited by 2 publications

References 4 publications

Measuring Small Business Dynamics and Employment with Private-Sector Real-Time Data

Measuring Small Business Dynamics and Employment with Private-Sector Real-Time Data

Measuring Small Business Dynamics and Employment with Private-Sector Real-Time Data

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