Measuring Small Business Dynamics and Employmentwith Private-Sector Real-Time Data

101 Pages Posted: 5 Aug 2021 Last revised: 23 Aug 2022

See all articles by Andre Kurmann

Andre Kurmann

Drexel University

Etienne Lalé

University of Quebec at Montreal (UQAM) - Université du Québec à Montréal; CIRANO; IZA

Lien Ta

Drexel University - Bennett S. LeBow College of Business

Date Written: August 19, 2022

Abstract

The COVID-19 pandemic has led to an explosion of research using private-sector datasets to measure business dynamics and employment in real-time. Yet questions remain about the representativeness of these datasets and how to distinguish business openings and closings from sample churn – i.e., sample entry of already operating businesses and sample exits of businesses that continue operating. This paper proposes new methods to address these issues and applies them to the case of Homebase, a real-time dataset of mostly small service-sector sector businesses that has been used extensively in the literature to study the effects of the pandemic. We match the Homebase establishment records with information on business activity from Safegraph, Google, and Facebook to assess the representativeness of the data and to estimate the probability of business closings and openings among sample exits and entries. We then exploit the high frequency / geographic detail of the data to study whether small service-sector businesses have been hit harder by the pandemic than larger firms, and the extent to which the Paycheck Protection Program (PPP) helped small businesses keep their workforce employed. We find that our real-time estimates of small business dynamics and employment during the pandemic are remarkably representative and closely fit population counterparts from administrative data that have recently become available. Distinguishing business closings and openings from sample churn is critical for these results. We also find that while employment by small businesses contracted more severely in the beginning of the pandemic than employment of larger businesses, it also recovered more strongly thereafter. In turn, our estimates suggests that the rapid rollout of PPP loans significantly mitigated the negative employment effects of the pandemic. Business closings and openings are a key driver for both results, thus underlining the importance of properly correcting for sample churn.

Keywords: Small business activity; Sample turnover versus business openings/closings; Matching records; COVID-19; Paycheck Protection Program; Federal Pandemic Unemployment Compensation

JEL Classification: E01, E24, E32, E60

Suggested Citation

Kurmann, Andre and Lalé, Etienne and Ta, Lien, Measuring Small Business Dynamics and Employmentwith Private-Sector Real-Time Data (August 19, 2022). Available at SSRN: https://ssrn.com/abstract=3896299 or http://dx.doi.org/10.2139/ssrn.3896299

Andre Kurmann

Drexel University ( email )

School of Economics
3141 Chestnut St
Philadelphia, PA 19104
United States

Etienne Lalé (Contact Author)

University of Quebec at Montreal (UQAM) - Université du Québec à Montréal ( email )

CP 8888 Succ Centre Ville
Montréal, Québec H3C3P8
Canada

CIRANO ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Lien Ta

Drexel University - Bennett S. LeBow College of Business ( email )

101 N. 33rd St.
Philadelphia, PA 19104
United States

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