The effects of COVID-19 on businesses: key versus non-key firms

This paper analyzes how a specific differentiation by governments throughout the world – whether a sec tor was deemed “essential” or “key” – affected firm performance. During the COVID-19 pandemic, govern ments designated specific services as “essential,” which allowed firms operating in those sectors to remain (partially) open as well as being granted other preferential treatment. This paper analyses the effects of the key-status, by mapping the countries’ lists to the sectoral level, and matching these sectors with firm-level Covid-19 survey data from 27 countries. The findings reveal that, controlling for a rich set of firm-level and sectoral characteristics, firms deemed key less often reported declining sales and demand for their goods or services, and had a smaller number of furloughed workers. Nonetheless, non-key firms were more likely to employ online business activities and to change the main product or service they offered, reflecting the necessity to otherwise adjust to the economic downturn and changes in demand. This paper analyzes how the Covid-19 pandemic affected key and non-key firms in 27 countries. The sample ranges from less developed to industrialized countries. To identify key firms, government emitted lists about industries and goods defined as essential were coded into 4-digit ISIC-Rev. 3 sectors. In addition, a keyword search in the description of a firm’s main product or service determines if its main activity resonates with the respective national government’s essential list. The effect of being deemed key is identified by controlling for observed and unobserved characteristics, which capture both the selection into the key-status and characteristics which itself affect how the firm is able to deal with the economic consequences of the pandemic. close. firms non-key firms non-key firms the East distinctive regions of the world. non-key firms online main or service that they offer. Some non-key firms therefore have been innovative in their response to the pandemic. of the pandemic? Or will being innovative and adaptive make non-key firms more resilient and productive once the pandemic has ceased?