Open AccessBusiness Exit During the COVID-19 Pandemic: Non-Traditional Measures in Historical Context
Author(s) -
Leland D. Crane,
Ryan A. Decker,
Aaron Flaaen,
Adrian Hamins-Puertolas,
C Kurz
Publication year - 2021
Publication title -
finance and economics discussion series
Language(s) - English
Resource type - Journals
eISSN - 2767-3898
pISSN - 1936-2854
DOI - 10.17016/feds.2020.089r1
Subject(s) - leverage (statistics) , pandemic , optimism , context (archaeology) , covid-19 , exit strategy , business , economics , demographic economics , marketing , geography , medicine , psychology , social psychology , disease , archaeology , pathology , machine learning , computer science , infectious disease (medical specialty)
Lags in official data releases have forced economists and policymakers to leverage "alternative" or "non-traditional" data to measure business exit resulting from the COVID- 19 pandemic. We first review official data on business exit in recent decades to place the alternative measures of exit within historical context. For the U.S., business exit is countercyclical and fairly common, with about 7.5 percent of firms exiting annually in recent years. Both the high level and the cyclicality of exit are driven by very small firms and establishments. We then explore a range of alternative measures of business exit, including novel measures based on paycheck issuance and phone-tracking data, which indicate exit was elevated in certain sectors during the first year of the pandemic. The evidence is mixed, however; many industries have likely seen lower-than-usual exit rates, and exiting businesses do not appear to represent a large share of U.S. employment. Actual exit is likely to have been lower than widespread expectations from early in the pandemic. Moreover, businesses have recently exhibited notable optimism about their survival prospects.