Determinants of Small Business Reopening Decisions after Covid Restrictions Were Lifted

68 Pages Posted: 15 Jun 2020 Last revised: 7 Oct 2021

See all articles by Dylan Balla-Elliott

Dylan Balla-Elliott

University of Chicago - Department of Economics; affiliation not provided to SSRN

Zoe Cullen

Harvard University - Business School (HBS)

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Michael Luca

Harvard University - Business School (HBS)

Christopher Stanton

Harvard University - Business School (HBS); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2020

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

Balla-Elliott, Dylan and Cullen, Zoe and Glaeser, Edward L. and Luca, Michael and Stanton, Christopher, Determinants of Small Business Reopening Decisions after Covid Restrictions Were Lifted (June 2020). NBER Working Paper No. w27362, Available at SSRN: https://ssrn.com/abstract=3626863

Dylan Balla-Elliott (Contact Author)

University of Chicago - Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

affiliation not provided to SSRN

Zoe Cullen

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=879471

Edward L. Glaeser

Harvard University - Department of Economics ( email )

Littauer Center
Room 315A
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United States
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Brookings Institution

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United States

National Bureau of Economic Research (NBER)

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Michael Luca

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=602417

Christopher Stanton

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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