Small Business under the COVID-19 Crisis: Expected Short- and Medium-Run Effects of Anti-Contagion and Economic Policies

31 Pages Posted: 25 Jun 2020 Last revised: 26 Sep 2021

See all articles by Kohei Kawaguchi

Kohei Kawaguchi

Hong Kong University of Science and Technology

Naomi Kodama

Meiji Gakuin University

Mari Tanaka

Hitotsubashi University, Graduate School of Economics

Date Written: April 27, 2020

Abstract

This study makes a causal inference on the effects of anti-contagion and economic policies on small business by conducting a survey on Japanese small business managers' expectations about the pandemic, policies, and firm performance. We first find the business suspension request decreased targeted firms' sales by 10 percentage points on top of the baseline 9 percentage points decline due to COVID-19, even though the Japanese anti-contagion policy was in a form of the government's request that is not legally enforceable. Second, using a discontinuity in the eligibility criteria, we find lump-sum and prompt subsidies improved firms' prospects of survival by 19 percentage points. Third, the medium-run recovery of firms' performance is expected to depend crucially on when infections would end, indicating that the anti-contagion policies could complement longer-run economic goals.

Keywords: COVID-19, Pandemic, Infection, Anti-contagion policies, Lockdown, Subsidy, Small business, Manager's expectation, Business performance, Survey, Causal inference

JEL Classification: C83, D80, D84, E17, E32, E66, I18, L50

Suggested Citation

Kawaguchi, Kohei and Kodama, Naomi and Tanaka, Mari, Small Business under the COVID-19 Crisis: Expected Short- and Medium-Run Effects of Anti-Contagion and Economic Policies (April 27, 2020). Journal of Japanese and International Economies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3634544 or http://dx.doi.org/10.2139/ssrn.3634544

Kohei Kawaguchi (Contact Author)

Hong Kong University of Science and Technology ( email )

6070 LSK Building, HKUST
Clear Water Bay
Kowloon
Hong Kong

Naomi Kodama

Meiji Gakuin University ( email )

Shirokane-dai 1-2-37, Minato-ku
Tokyo, Tokyo, 108 108-8636
United States

Mari Tanaka

Hitotsubashi University, Graduate School of Economics ( email )

Naka 2-1
Kunitachi, Tokyo 186-8601
Japan

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