How Did State Reopenings Affect Small Businesses?

Chakrabarti, Rajashri; Heise, Sebastian; Melcangi, Davide; Pinkovskiy, Maxim L.; Topa, Giorgio

Discussion Paper

How Did State Reopenings Affect Small Businesses?

Abstract: In our previous post, we looked at the effects that the reopening of state economies across the United States has had on consumer spending. We found a significant effect of reopening, especially regarding spending in restaurants and bars as well as in the healthcare sector. In this companion post, we focus specifically on small businesses, using two different sources of high-frequency data, and we employ a methodology similar to that of our previous post to study the effects of reopening on small business activity along various dimensions. Our results indicate that, much like for consumer spending, reopenings had positive and significant effects in the short term on small business revenues, the number of active merchants, and the number of employees working in small businesses. It is important to stress that we are not expressing any views in this post on the normative question of whether, when, or how states should loosen or tighten restrictions aimed at controlling the COVID-19 pandemic.

Keywords: state reopenings; COVID-19; small businesses; revenues; employment;

JEL Classification: E2;