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Business Exit During the COVID-19 Pandemic: Non-Traditional Measures in Historical Context

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Abstract

Given lags in official data releases, economists have studied "alternative data" measures of business exit resulting from the COVID-19 pandemic. Such measures are difficult to understand without historical context, so we review official data on business exit in recent decades. Business exit is common in the U.S., with about 7.5 percent of firms exiting annually in recent years, and is countercyclical (particularly recently). Both the high level and the cyclicality of exit are driven by very small firms. We explore a range of alternative measures and indicators of business exit, including novel measures based on payroll events and phone-tracking data, and find tentative evidence that exit has been elevated during 2020. Evidence is somewhat mixed, however, and exiting businesses do not appear to represent a large share of U.S. employment.

Suggested Citation

  • Leland Crane & Ryan Decker & Aaron Flaaen & Adrian Hamins-Puertolas & Christopher J. Kurz, 2020. "Business Exit During the COVID-19 Pandemic: Non-Traditional Measures in Historical Context," Finance and Economics Discussion Series 2020-089, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2020-89
    DOI: 10.17016/FEDS.2020.089
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    File URL: https://www.federalreserve.gov/econres/feds/files/2020089pap.pdf
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    1. Catherine Buffington & Carrie Dennis & Emin Dinlersoz & Lucia Foster & Shawn Klimek, 2020. "Measuring the Effect of COVID-19 on U.S. Small Businesses: The Small Business Pulse Survey," Working Papers 20-16, Center for Economic Studies, U.S. Census Bureau.
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    Cited by:

    1. Pierre-Olivier Gourinchas & Ṣebnem Kalemli-Özcan & Veronika Penciakova & Nick Sander, 2021. "COVID-19 and SMEs: A 2021 "Time Bomb"?," NBER Working Papers 28418, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Business cycles; Business exit; Firm dynamics; Job destruction; Nontraditional data;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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