Were small businesses more likely to permanently close in the pandemic?

Previous estimates indicate that COVID-19 led to a large drop in the number of operating businesses operating early in the pandemic, but surprisingly little is known on whether these shutdowns turned into permanent closures and whether small businesses were disproportionately hit. This paper provides the first analysis of permanent business closures using confidential administrative firm-level panel data covering the universe of businesses filing sales taxes from the California Department of Tax and Fee Administration. We find large increases in closure rates in the first two quarters of 2020, but a strong reversal of this trend in the third quarter of 2020. The increase in closures rates in the first two quarters of the pandemic was substantially larger for small businesses than large businesses, but the rebound in the third quarter was also larger. The disproportionate closing of small businesses led to a sharp concentration of market share among larger businesses as indicated by the Herfindahl-Hirschman Index with only a partial reversal after the initial increase. The findings highlight the fragility of small businesses during a large adverse shock and the consequences for the competitiveness of markets.

The early impacts of the COVID-19 pandemic on business sales.

Abstract: COVID-19 led to a massive shutdown of businesses in the second quarter of 2020. Estimates from the Current Population Survey, for example, indicate that the number of active business owners dropped by 22% from February to April 2020. We provide the first analysis of losses in sales among the universe of businesses in California using administrative data from the California Department of Tax and Fee Administration. Losses in taxable sales average 17% in the second quarter of 2020 relative to the second quarter of 2019 even though year-over-year sales typically grow by 3-4%. We find that sales losses were largest in businesses affected by mandatory lockdowns such as accommodations, which lost 91%, whereas online sales grew by 180%. Placing business types into different categories based on whether they were considered essential or nonessential (and thus subject to early lockdowns) and whether they have a moderate or high level of person-to-person contact, we find interesting correlations between sales losses and COVID-19 cases per capita across counties in California. The results suggest that local implementation and enforcement of lockdown restrictions as safety measures for public health and voluntary behavioral responses as reactions to the perceived local COVID-19 spread both played a role. Plain English Summary: Business sales dropped by 17% on average due to the pandemic during the second quarter of 2020 in California. Accommodations lost 91% of sales, whereas online sales grew by 180%. Sales fell more steeply in counties with more COVID-19 cases. We examine how much businesses lost in sales using administrative sales tax data. The average losses of 17% in the second quarter of 2020 relative to the second quarter of 2019 occurred even though year-over-year sales typically grow by 3-4%. We find that sales losses were largest in businesses affected by mandatory lockdowns such as accommodations, drinking places, and arts, entertainment, and recreation. Distinguishing between essential and nonessential businesses, which were subject to early lockdowns, and by the level of person-to-person contact, we find that local implementation and enforcement of lockdown restrictions for public health safety and voluntary responses to the perceived local COVID-19 spread both played a role. The results suggest that small businesses may need more support from governments and consumers to mitigate the strong shift to online vendors, and that the pandemic must be brought under control as a prerequisite to a full recovery. Supplementary Information: The online version contains supplementary material available at 10.1007/s11187-021-00479-4.

Did the Paycheck Protection Program and Economic Injury Disaster Loan Program get disbursed to minority communities in the early stages of COVID-19?

Social distancing restrictions and health- and economic-driven demand shifts from COVID-19 shut down many small businesses with especially negative impacts on minority owners. Is there evidence that the unprecedented federal government response to help small businesses-the Paycheck Protection Program (PPP) and the related COVID-19 Economic Injury Disaster Loans (EIDL)-which had a stated goal of helping disadvantaged groups, was disbursed evenly to minority communities? In this descriptive research note, we provide the first detailed analysis of how the 2020 PPP and EIDL funds were disbursed across minority communities in the country. From our analysis of data on the universe of loans from these programs and administrative data on employer firms, we generally find a slightly positive relationship between PPP loan receipt per business and the minority share of the population or businesses, although funds flowed to minority communities later than to communities with lower minority shares. PPP loan amounts per employee, however, are negatively related to the minority share of the population. The EIDL program, in contrast, both in numbers per business and amounts per employee, was distributed positively to minority communities.

Instructional interventions for improving COVID-19 knowledge, attitudes, behaviors: Evidence from a large-scale RCT in India.

Seeking ways to encourage broad compliance with health guidelines during the pandemic, especially among youth, we test two hypotheses pertaining to the optimal design of instructional interventions for improving COVID-19-related knowledge, attitudes, and behaviors. We randomly assigned 8376 lower-middle income youth in urban India to three treatments: a concentrated and targeted fact-based, instructional intervention; a longer instructional intervention that provided the same facts along with underlying scientific concepts; and a control. Relative to existing efforts, we find that both instructional interventions increased COVID-19-related knowledge immediately after intervention. Relative to the shorter fact-based intervention, the longer intervention resulted in sustained improvements in knowledge, attitudes, and self-reported behavior. Instead of reducing attention and comprehension by youth, the longer scientific based treatment appears to have increased understanding and retention of the material. The findings are instrumental to understanding the design of instruction and communication in affecting compliance during this and future pandemics.

Minority student and teaching assistant interactions in STEM.

Graduate student teaching assistants from underrepresented groups may provide salient role models and enhanced instruction to minority students in STEM fields. We explore minority student-TA interactions in an important course in the sciences and STEM - introductory chemistry labs - at a large public university. The uncommon assignment method of students to TA instructors in these chemistry labs overcomes selection problems, and the small and active learning classroom setting with required attendance provides frequent interactions with the TA. We find evidence that underrepresented minority students are less likely to drop courses and are more likely to pass courses when assigned to minority TAs, but we do not find evidence of effects for grades and medium-term outcomes. The effects for the first-order outcomes are large with a decrease in the drop rate by 5.5 percentage points on a base of 6 percent, and an increase in the pass rate of 4.8 percentage points on a base of 93.6 percent. The findings are similar when we focus on Latinx student - Latinx TA interactions. The findings are robust to first-time vs. multiple enrollments in labs, specifications with different levels of fixed effects, limited choice of TA race, limited information of TAs, and low registration priority students. The findings have implications for debates over increasing diversity among PhD students in STEM fields because of spillovers to minority undergraduates.

Early evidence of the impacts of COVID-19 on minority unemployment.

This paper provides early evidence of the impacts of the COVID-19 pandemic on minority unemployment in the United States. In the first month following March adoptions of social distancing measures by states, unemployment rose to 14.5% but a much higher 24.4% when we correct for potential data misclassification noted by the BLS. Using the official definition, unemployment in April 2020 among African-Americans rose by less than what would have been anticipated (to 16.6%) based on previous recessions, and the long-term ordering of unemployment across racial/ethnic groups was altered with Latinx unemployment (18.2%) rising for the first time to the highest among major groups. Difference-in-difference estimates confirm that the initial gap in unemployment between whites and blacks in April was not different than in periods prior to the pandemic; however, the racial gap expanded as unemployment for whites declined in the next two months but was largely stagnant for blacks. The initially large gap in unemployment between whites and Latinx in April was sustained in May and June as unemployment declined similarly for both groups. Non-linear decompositions show a favorable industry distribution partly protected black employment during the early stages of the pandemic, but that an unfavorable occupational distribution and lower average skills levels placed them at higher risk of job losses. An unfavorable occupational distribution and lower skills contributed to a sharply widened Latinx-white unemployment gap that moderated over time as rehiring occurred. These findings of disproportionate impacts on minority unemployment raise important concerns regarding lost earnings and wealth, and longer-term consequences of the pandemic on racial inequality in the United States.

The impact of COVID-19 on small business owners: Evidence from the first three months after widespread social-distancing restrictions.

Social-distancing restrictions and health- and economic-driven demand shifts from COVID-19 are expected to shutter many small businesses and entrepreneurial ventures, but there is very little early evidence on impacts. This paper provides the first analysis of impacts of the pandemic on the number of active small businesses in the United States using nationally representative data from the April 2020 Current Population Survey-the first month fully capturing early effects. The number of active business owners in the United States plummeted by 3.3 million or 22% over the crucial 2-month window from February to April 2020. The drop in active business owners was the largest on record, and losses to business activity were felt across nearly all industries. African-American businesses were hit especially hard experiencing a 41% drop in business activity. Latinx business owner activity fell by 32%, and Asian business owner activity dropped by 26%. Simulations indicate that industry compositions partly placed these groups at a higher risk of business activity losses. Immigrant business owners experienced substantial losses in business activity of 36%. Female business owners were also disproportionately affected (25% drop in business activity). Continuing the analysis in May and June, the number of active business owners remained low-down by 15% and 8%, respectively. The continued losses in May and June, and partial rebounds from April were felt across all demographic groups and most industries. These findings of early-stage losses to small business activity have important implications for policy, income losses, and future economic inequality.

Schooling and Covid-19: lessons from recent research on EdTech.

The wide-scale global movement of school education to remote instruction due to Covid-19 is unprecedented. The use of educational technology (EdTech) offers an alternative to in-person learning and reinforces social distancing, but there is limited evidence on whether and how EdTech affects academic outcomes. Recently, we conducted two large-scale randomized experiments, involving ~10,000 primary school students in China and Russia, to evaluate the effectiveness of EdTech as a substitute for traditional schooling. In China, we examined whether EdTech improves academic outcomes relative to paper-and-pencil workbook exercises of identical content. We found that EdTech was a perfect substitute for traditional learning. In Russia, we further explored how much EdTech can substitute for traditional learning. We found that EdTech substitutes only to a limited extent. The findings from these large-scale trials indicate that we need to be careful about using EdTech as a full-scale substitute for the traditional instruction received by schoolchildren.

The effects of male peers on the educational outcomes of female college students in STEM: Experimental evidence from partnerships in Chemistry courses.

A major concern among universities around the world is that female students face gender bias, discrimination and related barriers in male-dominated STEM fields. To investigate this concern, we conducted a novel large-scale experiment of interactions between female and male students in one of the most important gateway courses for the Sciences and a course in which students interact one-on-one extensively throughout the term. Over the past four years, at a large public research university, we randomly paired every student enrolled in an introductory Chemistry lab (3,902 students and total N = 5,537). Using precise estimates from the experiment, we provide novel evidence that female students are not negatively affected academically by male partners. When assigned a male partner, female students do not receive lower scores or grades, and they are no more likely to drop the course or not continue in Chemistry or a STEM field. We also find that academically weaker female students are not negatively affected by male students and that female students are not negatively affected when paired with academically stronger male students. Although previous studies have documented that female students self-report experiencing gender bias from male peers in STEM, importantly, we do not find evidence that female students are negatively affected by male peers in intensive, long-term pairwise interactions in their course grades or future STEM course taking. The findings provide hopeful news for future trends in female representation in STEM fields.

Little effect of insurance status or socioeconomic condition on disparities in minority appendicitis perforation rates.

OBJECTIVE: To estimate how much of the gap in appendicitis perforation rates between minority and white children is explained by differences in socioeconomic and insurance factors. DESIGN: Observational analysis of hospital discharge information. SETTING: The Healthcare Cost and Utilization Project database. PARTICIPANTS: Appendicitis perforation rates determined from the Healthcare Cost and Utilization Project database of hospital discharges from 2001 to 2008. MAIN OUTCOME MEASURES: The proportion of the gap between perforation rates explained by various patient- and hospital-level variables. RESULTS: There were no disparities observed in adult appendicitis perforation rates. The perforation rate for white children was 26.7%; black children, 35.5%; and Latino children, 36.5%. Gap analysis showed that only 12.0% of the difference in perforation rates between black and white children was explained by insurance status and only 12.7% of the difference between Latino and white children was explained. Income level only accounted for 7.2% of the gap for black children and 6.1% for Latino children. Age explained one-third of the gap for Latino children and one-third was not accounted for by measurable variables. Two-thirds of the difference between appendicitis perforation rates between black and white children was not explained by measurable factors. CONCLUSIONS: A very small amount of the gap between minority and white children's appendicitis rates is explained by the proxy factors for health insurance and poverty status that might relate to health care access. Appendicitis perforation rates are not an appropriate indicator of health care access.

Is employer-based health insurance a barrier to entrepreneurship?

The focus on employer-provided health insurance in the United States may restrict business creation. We address the limited research on the topic of "entrepreneurship lock" by using recent panel data from matched Current Population Surveys. We use difference-in-difference models to estimate the interaction between having a spouse with employer-based health insurance and potential demand for health care. We find evidence of a larger negative effect of health insurance demand on business creation for those without spousal coverage than for those with spousal coverage. We also take a new approach in the literature to examine the question of whether employer-based health insurance discourages business creation by exploiting the discontinuity created at age 65 through the qualification for Medicare. Using a novel procedure of identifying age in months from matched monthly CPS data, we compare the probability of business ownership among male workers in the months just before turning age 65 and in the months just after turning age 65. We find that business ownership rates increase from just under age 65 to just over age 65, whereas we find no change in business ownership rates from just before to just after for other ages 55-75. We also do not find evidence from the previous literature and additional estimates that other confounding factors such as retirement, partial retirement, social security and pension eligibility are responsible for the increase in business ownership in the month individuals turn 65. Our estimates provide some evidence that "entrepreneurship lock" exists, which raises concerns that the bundling of health insurance and employment may create an inefficient level of business creation.

Last hired, first fired? Black-white unemployment and the business cycle.

Studies have tested the claim that blacks are the last hired during periods of economic growth and the first fired in recessions by examining the movement of relative unemployment rates over the business cycle. Any conclusion drawn from this type of analysis must be viewed as tentative because cyclical movements in the underlying transitions into and out of unemployment are not examined. Using Current Population Survey data matched across adjacent months from 1989-2004, this article provides the first detailed examination of labor market transitions for prime-age black and white men to test the last hired, first fired hypothesis. Considerable evidence is presented that blacks are the first fired as the business cycle weakens. However no evidence is found that blacks are the last hired. Instead, blacks appear to be initially hired from the ranks of the unemployed early in the business cycle and later are drawn from nonparticipation. The narrowing of the racial unemployment gap near the peak of the business cycle is driven by a reduction in the rate of job loss for blacks rather than increases in hiring.

Private schools and "Latino flight" from black schoolchildren.

Several recent studies provided evidence that white students' choice between private and public schools is influenced by the racial composition of the local student population. None of these studies, however, examined whether Latinos are also fleeing to private schools in response to black schoolchildren. I explore the "Latino-flight" hypothesis using data from the National Educational Longitudinal Study and a recently released confidential data set from the National Center for Educational Statistics. In probit regressions for the probability of Latinos attending private schools, I found a large, positive, and statistically significant coefficient on the black share of the school-age population. The coefficient estimates imply that a 10-percentage point increase in the black share increases the probability of private school attendance by 25.7% to 33.2% among Latino 8th graders and 35.2% to 52.2% among Latino 10th graders. I interpret these results as providing evidence of "Latino flight" from public schools into private schools. I did not find evidence that Latinos respond differently to black schoolchildren than do whites.