JUE Insight: The geographic spread of COVID-19 correlates with the structure of social networks as measured by Facebook.

We use aggregated data from Facebook to show that COVID-19 is more likely to spread between regions with stronger social network connections. Areas with more social ties to two early COVID-19 "hotspots" (Westchester County, NY, in the U.S. and Lodi province in Italy) generally had more confirmed COVID-19 cases by the end of March. These relationships hold after controlling for geographic distance to the hotspots as well as the population density and demographics of the regions. As the pandemic progressed in the U.S., a county's social proximity to recent COVID-19 cases and deaths predicts future outbreaks over and above physical proximity and demographics. In part due to its broad coverage, social connectedness data provides additional predictive power to measures based on smartphone location or online search data. These results suggest that data from online social networks can be useful to epidemiologists and others hoping to forecast the spread of communicable diseases such as COVID-19.

Social Networks Shape Beliefs and Behavior: Evidence from Social Distancing During the COVID-19 Pandemic

We show that social network exposure to COVID-19 cases shapes individuals’ beliefs and behaviors concerning the coronavirus. We use de-identified data from Facebook to document that individuals with friends in areas with worse COVID-19 outbreaks reduce their mobility more than otherwise similar individuals with friends in less affected areas. The effects are quantitatively large and long-lasting: a one standard deviation increase in friend-exposure to COVID-19 cases in March 2020 results in a 1.2 percentage point increase in the probability of staying home on a given day through at least the end of May 2020. As the pandemic progresses—and the characteristics of individuals with the highest friend-exposure vary— changes in friend-exposure continue to drive changes in social distancing behavior, ruling out many unobserved effects as drivers of our results. We also show that individuals with higher friend-exposure to COVID-19 are more likely to publicly post in support of social distancing measures and less likely to be members of groups advocating to "reopen" the economy. These findings suggest that friends can influence individuals’ beliefs about the risks of the disease and thereby induce them to engage in mitigating public health behavior.

Racial Disparities in Access to Small Business Credit: Evidence from the Paycheck Protection Program

We explore the sources of racial disparities in small business lending by studying the $806 billion Paycheck Protection Program (PPP), which was designed to support small business jobs during the COVID-19 pandemic. PPP loans were administered by private lenders but federally guaranteed, largely eliminating unobservable credit risk as a factor in explaining differential lending by race. We document that even after controlling for a firm’s zip code, industry, loan size, PPP approval date, and other characteristics, Black-owned businesses were 12.1 percentage points (70% of the mean) more likely to obtain their PPP loan from a fintech lender than a traditional bank. Among conventional lenders, smaller banks were much less likely to lend to Black-owned firms, while the Top-4 banks exhibited little to no disparity after including controls. We use novel data to show that the disparity is not primarily explained by differences in pre-existing bank or credit relationships, firm financial positions, fintech affinity, or borrower application behavior. In contrast, we document that Black-owned businesses’ higher rate of borrowing from fintechs compared to smaller banks is particularly large in places with high racial animus, pointing to a potential role for discrimination in explaining some of the racial disparities in small business lending. We find evidence that when small banks automate their lending processes, and thus reduce human involvement in the loan origination process, their rate of PPP lending to Black-owned businesses increases, with larger effects in places with more racial animus.

Inside the Mind of a Stock Market Crash

We analyze how investor expectations about economic growth and stock returns changed during the February-March 2020 stock market crash induced by the COVID-19 pandemic, as well as during the subsequent partial stock market recovery. We surveyed retail investors who are clients of Vanguard at three points in time: (i) on February 11-12, around the all-time stock market high, (ii) on March 11-12, after the stock market had collapsed by over 20%, and (iii) on April 16-17, after the market had rallied 25% from its lowest point. Following the crash, the average investor turned more pessimistic about the short-run performance of both the stock market and the real economy. Investors also perceived higher probabilities of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investor expectations about long-run (10-year) economic and stock market outcomes remained largely unchanged, and, if anything, improved. Disagreement among investors about economic and stock market outcomes also increased substantially following the stock market crash, with the disagreement persisting through the partial market recovery. Those respondents who were the most optimistic in February saw the largest decline in expectations, and sold the most equity. Those respondents who were the most pessimistic in February largely left their portfolios unchanged during and after the crash.

The Geographic Spread of COVID-19 Correlates with the Structure of Social Networks as Measured by Facebook

We use aggregated data from Facebook to show that COVID-19 was more likely to spread between regions with stronger social network connections. Areas with more social ties to two early COVID-19 “hotspots” (Westchester County, NY, in the U.S. and Lodi province in Italy) generally had more confirmed COVID-19 cases as of the end of March. These relationships hold after controlling for geographic distance to the hotspots as well as for the income and population densities of the regions. As the pandemic progressed in the U.S., a county's social proximity to recent COVID- 19 cases predicts future outbreaks over and above physical proximity. These results suggest data from online social networks can be useful to epidemiologists and others hoping to forecast the spread of communicable diseases such as COVID-19.

The Effects of COVID-19 on U.S. Small Businesses: Evidence from Owners, Managers, and Employees

We analyze a large-scale survey of owners, managers, and employees of small businesses in the United States to understand the effects of the early stages of the COVID-19 pandemic on those businesses. The survey was fielded in late April 2020 among Facebook business page administrators, frequent sellers on Facebook's e-commerce platform Marketplace, and the general Facebook user population. We observe more than 66,000 responses covering most sectors of the economy, including many businesses that had stopped operating due to the pandemic. The survey asks 136 questions covering topics such as changes in business operations and employment, changes in financing patterns, and the interaction of household and business responsibilities. We characterize the adjustments implemented to survive the pandemic and explore the key challenges to continue operating or to re-open. We show how these patterns differ across industry, firm size, owner gender, and other firm characteristics.

The joint dynamics of investor beliefs and trading during the COVID-19 crash.

We analyze how investor expectations about economic growth and stock returns changed during the February-March 2020 stock market crash induced by the COVID-19 pandemic, as well as during the subsequent partial stock market recovery. We surveyed retail investors who are clients of Vanguard at three points in time: 1) on February 11-12, around the all-time stock market high, 2) on March 11-12, after the stock market had collapsed by over 20%, and 3) on April 16-17, after the market had rallied 25% from its lowest point. Following the crash, the average investor turned more pessimistic about the short-run performance of both the stock market and the real economy. Investors also perceived higher probabilities of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investor expectations about long-run (10-y) economic and stock market outcomes remained largely unchanged, and, if anything, improved. Disagreement among investors about economic and stock market outcomes also increased substantially following the stock market crash, with the disagreement persisting through the partial market recovery. Those respondents who were the most optimistic in February saw the largest decline in expectations and sold the most equity. Those respondents who were the most pessimistic in February largely left their portfolios unchanged during and after the crash.