2 Notwithstanding the widespread support, the amount of assistance has varied widely across countries and has been piecemeal or absent in some middle and lower-income countries.
2020) and 80 per cent of countries have provided some form of financial assistance to small businesses, in an aim to dampen the economic turmoil for firms (International Monetary Fund 2021). In response to the pandemic, almost 90 per cent of countries have provided liquidity for firms and supported entrepreneurs (Gentilini et al. In general, government support and physical distancing measures, as well as their stringency, varied starkly between countries. This paper examines the economic effects of the pandemic on businesses and their responses, distinguishing between key and non-key firms. Across the world, governments drew distinctions between those firms allowed to operate, both with and without customer contact, and firms that had to temporarily close their operations. Such firms ranged from food producers to toilet paper manufacturers to gas stations. While lockdown and physical distancing measures forced many firms to close at least partially, parts of the economy that were deemed “essential” or “key” to the functioning of society were allowed or required to continue operating. During the COVID-19 pandemic, many governments throughout the world tried to support enterprises and businesses in an effort to mitigate economic hardship, but the private sector nonetheless faced multiple challenges, such as lower demand, disrupted supply chains, declines in investment and dampened expectations. While the objective of most governments since the start of the pandemic has been to minimize infection and hospitalization rates through the use of lockdowns, curfews and other restrictions on in-person gatherings, such restrictions have had severe economic consequences on the operation of businesses and the sustainability of individual livelihoods. The Covid-19 pandemic began as a public health crisis that quickly turned into an economic crisis. 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. 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. 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. During the COVID-19 pandemic, governments 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 analyzes how a specific differentiation by governments throughout the world – whether a sector was deemed “essential” or “key” – affected firm performance. The effects of COVID-19 on businesses: key versus non-key firms
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