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Revenue collapses and the consumption of small business owners in the COVID-19 pandemic

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  • Kim, Olivia S.
  • Parker, Jonathan A.
  • Schoar, Antoinette

Abstract

Using financial account data linking small businesses to their owner households, we examine how business owners’ consumption responded to changes in business revenues during the COVID-19 crisis. In the first two months following the National Emergency, business revenues declined by 40 percent, largely driven by national factors rather than local infection rates or policies. However, the pass-through of revenue losses to owner consumption was limited: each dollar of revenue loss resulted in only a 1.6-cent decline in consumption. This muted pass-through persisted through 2021, even after the introduction of COVID-19 vaccines. Our findings suggest that federal subsidies and pandemic-induced reductions in spending opportunities explain the limited impact.

Suggested Citation

  • Kim, Olivia S. & Parker, Jonathan A. & Schoar, Antoinette, 2025. "Revenue collapses and the consumption of small business owners in the COVID-19 pandemic," Journal of Financial Economics, Elsevier, vol. 170(C).
    • Handle: RePEc:eee:jfinec:v:170:y:2025:i:c:s0304405x2500087x
    DOI: 10.1016/j.jfineco.2025.104079
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