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

Olivia S. Kim, Jonathan Parker and Antoinette Schoar

No 28151, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using financial account data linking small businesses to their owner households, we examine how business owners’ consumption responded to changes in business revenues during the COVID-19 crisis. In the first two months following the National Emergency, business revenues declined by 40 percent, largely driven by national factors rather than local infection rates or policies. However, the pass-through of revenue losses to owner consumption was limited: each dollar of revenue loss resulted in only a 1.6-cent decline in consumption. This muted pass-through persisted through 2021, even after the introduction of COVID-19 vaccines. Our findings suggest that federal subsidies and pandemic-induced reductions in spending opportunities explain the limited impact.

JEL-codes: D12 D15 D25 E2 E63 E65 G32 G5 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-mac
Note: CF EFG ME PE PR
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Citations: View citations in EconPapers (21)

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