COVID-19 and Small Businesses: Uneven Patterns by Race and Income

Avtar, Ruchi; Chakrabarti, Rajashri; Melcangi, Davide; Pinkovskiy, Maxim L.; Topa, Giorgio

Discussion Paper

COVID-19 and Small Businesses: Uneven Patterns by Race and Income

Abstract: The COVID-19 pandemic resulted in one of the sharpest recessions and recoveries in U.S. history. As the virus spread over the country in a matter of weeks in March 2020, most states rapidly locked down nonessential economic activity, which plummeted as a result. As the first wave of COVID-19 subsided and people gradually learned to “live with the virus,” states reversed most of the initial lockdowns and economic activity rebounded. In our ongoing Economic Inequality series, we have explored many aspects of how the economic turmoil associated with COVID-19 differentially affected households. Here, we turn to small business experience. The first post in this three-part installment seeks to understand if there was variance in small business activity across counties that differed by income and race. In two companion posts, we investigate the experience of small businesses in terms of credit access, looking at characteristics of who received and who benefited from the Paycheck Protection Program (PPP). The analysis finds inequalities in PPP credit access as well as differences in the loan and recipient county characteristics for those who received loans through financial technology (fintech) providers versus other lenders.

Keywords: COVID-19; pandemic; small business; economic activity; recession; race; income;

JEL Classification: E3; I1; I3;