Working Paper: NBER ID: w30532
Authors: Robert W. Fairlie
Abstract: Many small businesses have closed, lost revenues, or downsized as a response to health and economic disruptions caused by COVID-19. But, were economic losses in the pandemic disproportionately felt by businesses owned by people of color? This paper provides the first study of the impacts of COVID-19 on racial inequality in business earnings. Pandemic-induced losses to business earnings in 2020 were 16-19 percent for all business owners. Racial inequality increased in the pandemic: Black business owners experienced larger negative impacts on business earnings of 12-14 percent relative to white business owners. Regression estimates for Latinx and Asian business owners reveal negative point estimates but the estimates are not statistically significant. Using Blinder-Oaxaca decompositions and a new pandemic-focused decomposition technique, I find that the industry concentrations of Black, Latinx, and Asian business owners placed each of these groups at a higher risk of experiencing disproportionate business earnings losses in the pandemic. Higher education levels among Asian business owners helped insulate them from larger losses from COVID-19. Finally, differential exposure to COVID case rates, business closure policies, and mask mandates did not contribute to racial inequality in business earnings losses.
Keywords: No keywords provided
JEL Codes: J15; J3; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| COVID-19 case rates (Y10) | racial inequality in business earnings losses (J70) |
| Industry concentrations (L69) | earnings losses for black, Latinx, and Asian business owners (N86) |
| Lower education levels (I24) | earnings disparities for black business owners (N87) |
| COVID-19 (I15) | business earnings (D33) |
| COVID-19 (I15) | black business owners' earnings (N82) |