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Determinants of Small Business Reopening Decisions After COVID Restrictions Were Lifted

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  • Dylan Balla-Elliott
  • Zoë B. Cullen
  • Edward L. Glaeser
  • Michael Luca
  • Christopher T. Stanton

Abstract

The COVID-19 pandemic led to dramatic economic disruptions, including government-imposed restrictions that required millions of American businesses to temporarily close. We present three main facts about business decisions to reopen at the end of the lockdown, using a nation-wide survey of thousands of small businesses. First, the plurality of firms reopened within days of the end of legal restrictions, suggesting that the lockdowns were generally binding for businesses - although a sizable minority delayed their reopening. Second, decisions to delay reopenings were not driven by public health concerns. Instead, businesses in high-proximity sectors planned to reopen more slowly because of expectations of stricter regulation rather than concerns about public health. Third, pessimistic demand projections played the primary role in explaining delays among firms that could legally reopen. Owners expected demand to be one-third lower than before the crisis throughout the pandemic. Using experimentally induced shocks to perceived demand, we find that a 10% decline in expected demand results in a 1.5 percentage point (8%) increase in the likelihood that firms expected to remain closed for at least one month after being legally able to open.

Suggested Citation

  • Dylan Balla-Elliott & Zoë B. Cullen & Edward L. Glaeser & Michael Luca & Christopher T. Stanton, 2020. "Determinants of Small Business Reopening Decisions After COVID Restrictions Were Lifted," NBER Working Papers 27362, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27362
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    References listed on IDEAS

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    1. Mohammad Akbarpour & Cody Cook & Aude Marzuoli & Simon Mongey & Abhishek Nagaraj & Matteo Saccarola & Pietro Tebaldi & Shoshana Vasserman & Hanbin Yang, 2020. "Socioeconomic Network Heterogeneity and Pandemic Policy Response," NBER Working Papers 27374, National Bureau of Economic Research, Inc.
    2. Sumedha Gupta & Thuy D. Nguyen & Felipe Lozano Rojas & Shyam Raman & Byungkyu Lee & Ana Bento & Kosali I. Simon & Coady Wing, 2020. "Tracking Public and Private Responses to the COVID-19 Epidemic: Evidence from State and Local Government Actions," NBER Working Papers 27027, National Bureau of Economic Research, Inc.
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    4. Eleanor W. Dillon & Christopher T. Stanton, 2017. "Self-Employment Dynamics and the Returns to Entrepreneurship," NBER Working Papers 23168, National Bureau of Economic Research, Inc.
    5. Forsythe, Eliza & Kahn, Lisa B. & Lange, Fabian & Wiczer, David, 2020. "Labor demand in the time of COVID-19: Evidence from vacancy postings and UI claims," Journal of Public Economics, Elsevier, vol. 189(C).
    6. Villas-Boas, Sofia B & Sears, James & Villas-Boas, Miguel & Villas-Boas, Vasco, 2020. "Are We #StayingHome to Flatten the Curve?," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5h97n884, Department of Agricultural & Resource Economics, UC Berkeley.
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    Cited by:

    1. Kusnandar & Setyowati, Nuning & Wida Riptanti, Erlyna, 2023. "Creating an innovative culture in agribusiness of micro, small and medium-sized enterprises," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 9(2), June.
    2. Sumedha Gupta & Kosali I. Simon & Coady Wing, 2020. "Mandated and Voluntary Social Distancing During The COVID-19 Epidemic: A Review," NBER Working Papers 28139, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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