Small Business Survival Capabilities and Policy Effectiveness: Evidence from Oakland
50 Pages Posted: 6 Aug 2020
Date Written: July 26, 2020
Using unique City of Oakland data during COVID-19, we document that small business survival capabilities vary by firm size as a function of revenue resiliency, labor flexibility, and committed costs. Nonemployer businesses rely on low cost structures to survive 73% declines in own-store foot traffic. Microbusinesses (1-to-5 employees) depend on 14% greater revenue resiliency. Enterprises (6-to-50 employees) have twice-as-much labor flexibility, but face 11%-to-22% higher residual closure risk from committed costs. Finally, inconsistent with the spirit of Chetty-Friedman-Hendren-Sterner (2020) and Granja-Makridis-Yannelis-Zwick (2020), PPP application success increased medium-run survival probability by 20.5%, but only for microbusinesses, arguing for size-targeting of policies.
Keywords: Small business, COVID-19, pandemic, Payroll Protection Program (PPP), Pandemic Unemployment Insurance, entrepreneurship, main street, microbusiness, foot traffic, business survival, labor flexibility
JEL Classification: E61, E65, E32, H32, H84, L26, J65, G38
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