Determinants of Small Business Reopening Decisions After COVID Restrictions Were Lifted

Dylan Balla-Elliott, Zoë B. Cullen, Edward Glaeser, Michael Luca and Christopher T. Stanton

No 27362, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The COVID-19 pandemic led to dramatic economic disruptions, including government-imposed restrictions that required millions of American businesses to temporarily close. We present three main facts about business decisions to reopen at the end of the lockdown, using a nation-wide survey of thousands of small businesses. First, the plurality of firms reopened within days of the end of legal restrictions, suggesting that the lockdowns were generally binding for businesses - although a sizable minority delayed their reopening. Second, decisions to delay reopenings were not driven by public health concerns. Instead, businesses in high-proximity sectors planned to reopen more slowly because of expectations of stricter regulation rather than concerns about public health. Third, pessimistic demand projections played the primary role in explaining delays among firms that could legally reopen. Owners expected demand to be one-third lower than before the crisis throughout the pandemic. Using experimentally induced shocks to perceived demand, we find that a 10% decline in expected demand results in a 1.5 percentage point (8%) increase in the likelihood that firms expected to remain closed for at least one month after being legally able to open.

JEL-codes: D22 E32 I15 L23 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-mac
Note: EH IO LE LS PE POL PR
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Published as Dylan Balla?Elliott & Zoë B. Cullen & Edward L. Glaeser & Michael Luca & Christopher Stanton, 2022. "DETERMINANTS OF SMALL BUSINESS REOPENING DECISIONS AFTER COVID RESTRICTIONS WERE LIFTED," Journal of Policy Analysis and Management, vol 41(1), pages 278-317.

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