Working Paper: NBER ID: w27629
Authors: Robert P. Bartlett III; Adair Morse
Abstract: Using unique City of Oakland data during COVID-19, we document that small business survival capabilities vary by firm size as a function of revenue resiliency, labor flexibility, and committed costs. Nonemployer businesses rely on low cost structures to survive 73% declines in own-store foot traffic. Microbusinesses (1-to-5 employees) depend on 14% greater revenue resiliency. Enterprises (6-to-50 employees) have twice-as-much labor flexibility, but face 11%-to-22% higher residual closure risk from committed costs. Finally, inconsistent with the spirit of Chetty-Friedman-Hendren-Sterner (2020) and Granja-Makridis-Yannelis-Zwick (2020), PPP application success increased medium-run survival probability by 20.5%, but only for microbusinesses, arguing for size-targeting of policies.
Keywords: small business; COVID-19; survival capabilities; policy effectiveness; Paycheck Protection Program
JEL Codes: E61; G38; H32; J65; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| small business characteristics (firm size, revenue resiliency, labor flexibility, committed costs) (L25) | survival during the COVID-19 pandemic (I14) |
| firm size (L25) | survival capabilities (I31) |
| microbusinesses (N80) | lesser decline in revenue compared to enterprises (L25) |
| PPP (H69) | medium-run survival probability for microbusinesses (C41) |
| committed costs (D23) | closure risks for enterprises (G33) |
| labor flexibility (J29) | scaling back operations (D25) |
| labor flexibility and higher committed costs (J30) | jeopardizes survival of larger enterprises (D25) |