Working Remotely and the Supply-Side Impact of COVID-19

Abstract

We analyze the supply-side disruptions associated with COVID-19 using differences in the ability of workers to work remotely. Sectors in which a higher fraction of the workforce is not able to work remotely experienced greater declines in employment and expected revenue growth, worse stock market performance, and higher likelihood of default. Lower-paid workers, especially female workers with young children, were significantly more affected by these disruptions. The stock market overweighs low-exposure industries, helping explain the disconnect between stock market indices and aggregate outcomes. Further, we find evidence that the Paycheck Protection Program provided less relief per-employee to the most exposed sectors. Finally, we combine these ex-ante heterogeneous industry exposures with daily financial market data to create a stock return portfolio that most closely replicates the supply-side disruptions resulting from the pandemic.