Business Reopening Decisions and Demand Forecasts During the COVID-19 Pandemic

75 Pages Posted: 26 Jun 2020

See all articles by Dylan Balla-Elliott

Dylan Balla-Elliott

Harvard University - Business School (HBS)

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 23, 2020

Abstract

How quickly will American businesses reopen after COVID-19 lockdowns end? We use a nationwide survey of small businesses to measure firms’ expectations about their re-opening and future demand. A plurality of firms in our sample expect to reopen within days of the end of legal restrictions, but a sizable minority expect to delay their reopening. While health-related variables, such as COVID-19 case rates and physical proximity of workers, do explain the prevalence and expected duration of regulated lockdown, these variables have little or no correlation with post-lockdown reopening intentions. Instead, almost one half of closed or partially open businesses said that their reopening would depend on the reopening of related businesses, including customers and suppliers. Owners expect demand to be one-third lower than before the crisis through autumn. Firms with more pessimistic expectations about demand predict a later reopening. Using an instrumental variables strategy, we estimate the relationship between demand expectations and reopening. These estimates suggest that post-lockdown delays in reopening can be explained by low levels of expected demand.

JEL Classification: D22, E32, I15, L23

Suggested Citation

Balla-Elliott, Dylan and Cullen, Zoe and Glaeser, Edward L. and Luca, Michael and Stanton, Christopher, Business Reopening Decisions and Demand Forecasts During the COVID-19 Pandemic (June 23, 2020). Harvard Business School Entrepreneurial Management Working Paper No. 20-132, Available at SSRN: https://ssrn.com/abstract=3634162 or http://dx.doi.org/10.2139/ssrn.3634162

Dylan Balla-Elliott

Harvard University - Business School (HBS) ( email )

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

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
Cambridge, MA 02138
United States
617-496-2150 (Phone)
617-496-1722 (Fax)

Brookings Institution

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
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 (Contact Author)

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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