The Effects of COVID-19 on U.S. Small Businesses: Evidence from Owners, Managers, and Employees

Abstract

We analyze a large-scale survey of owners, managers, and employees of small businesses in the United States to understand the effects of the early stages of the COVID-19 pandemic on those businesses. The survey was fielded in late April 2020 among Facebook business page administrators, frequent sellers on Facebook's e-commerce platform Marketplace, and the general Facebook user population. We observe more than 66,000 responses covering most sectors of the economy, including many businesses that had stopped operating due to the pandemic. The survey asks 136 questions covering topics such as changes in business operations and employment, changes in financing patterns, and the interaction of household and business responsibilities. We characterize the adjustments implemented to survive the pandemic and explore the key challenges to continue operating or to reopen. We show how these patterns differ across industry, firm size, owner gender, and other firm characteristics.

Revenue Collapses and the Consumption of Small Business Owners in the Early Stages of the COVID-19 Pandemic

“…Roughly 85% of businesses sampled in our data are nonemployer businesses, similar to 81% in the U.S. overall. Thus, a key advantage of our data is better coverage of nonemployer businesses realtive to traditional data sources (Alekseev et al, 2020). However, relative to the benchmark, our sample under-represents businesses that existed for more than 10 years and over-represents businesses that operate in professional services, real estate, and transportation sectors.…”

“…Bartlett III and Morse (2020) finds that larger small businesses experienced 14% higher revenue declines than smaller small businesses, and Humphries et al (2020) reports that 60% of small businesses had laid off at least one worker by the end of April. Alekseev et al (2020) documents that increased household responsibilities, such as taking care of children and self-isolating household members, affected business owners' ability to focus on work during the crisis. Studies that make use of administrative data document a sudden, 12.7% drop in median business cash balances at the onset of the pandemic (Farrell et al, 2020b) and substantial heterogeneity in the speed of recovery by owner's race or by income profiles of the neighborhood in which businesses operate, with African-American businesses recovering at a slower rate than White-owned businesses (Fairlie, 2020) and business located in less affluent areas experiencing smaller revenue losses than those located with more affluent areas (Chetty et al, 2020).…”

Trade in the time of parcels

“…These include the use of business surveys 7 , household surveys, information based on credit card use and other payment processing firms, as well as information from postal and courier operators, or customs transactions (OECD-WTO-IMF, 2020 [9]). 8…”

“…An additional dynamic has been the greater expansion of business-to-consumer (B2C) 9 parcel transactions from an originally business-to-business (B2B) 10 dominated market, with about a fifth of B2C transactions being cross-border. This has led to 8 Another avenue to explore in developing statistics on international digitally ordered transactions involves microdata linking, for example by integrating merchandise trade statistics with e-commerce enterprise surveys, albeit coupled with stylised assumptions relating to foreign/domestic e-commerce splits, or proportionality assumptions when applying the share of foreign sales that occurs via e-commerce equally to all products and trading partners. 9 B2C involves sales by enterprises to consumers and by traditional bricks-and-mortar retail or manufacturing firms that add an online sales channel.…”

The Impact of Covid-19 on Productivity

“…Lastly, our paper is one of many in a rapidly growing literature on the economic impact of Covid-19, which are already too numerous to cite and many of which are surveyed in Brodeur et al (2020). Some examples include Alekseev et al (2020), Bartik et al (2020a and2020b), Brynjolfsson et al (2020), Buffington et al (2020), Bloom, Fletcher andYeh (2020), Gourinchas et al (2020), and Papanikolaou and Schmidt (2020) who show pervasive impacts on firms. Baqaee and Farhi (2020) show that negative sectoral supply shocks can be stagflationary and can be amplified by complementarities in production, Chetty et al (2020), Kahn et al (2020) and Cajner et al (2020) show large and heterogeneous labour-market impacts of Covid-19, Adams-Prassl et al (2020), Alon et al (2020) and Mongey et al (2020) and show the gender impact of the pandemic, Guerrieri et al (2020) show that supply shocks can cause demand shortages, and Jorda et al (2020) examine the longer-run consequences of past pandemics.…”