2021 FIRM-LEVEL HETEROGENEITY IN THE IMPACT OF THE COVID-19 PANDEMIC - Documentos de Trabajo

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FIRM-LEVEL HETEROGENEITY IN THE
IMPACT OF THE COVID-19 PANDEMIC
                                                2021

Documentos de Trabajo
N.º 2120

Alejandro Fernández-Cerezo, Beatriz González,
Mario Izquierdo and Enrique Moral-Benito
FIRM-LEVEL HETEROGENEITY IN THE IMPACT OF THE COVID-19 PANDEMIC
FIRM-LEVEL HETEROGENEITY IN THE IMPACT
OF THE COVID-19 PANDEMIC (*)

Alejandro Fernández-Cerezo, Beatriz González, Mario Izquierdo
and Enrique Moral-Benito
BANCO DE ESPAÑA

(*) Banco de España. Corresponding emails: alejandrofernandez@bde.es (Alejandro Fernández-Cerezo),
beatrizgonzalez@bde.es (Beatriz González), mizquierdo@bde.es (Mario Izquierdo) and enrique.moral@bde.es
(Enrique Moral-Benito). We would like to thank Manuel Ortega and Joaquin Rivero as well as the Central Balance
Sheet Data Office Division for their invaluable help undertaking the survey. We are also grateful to the Information
System Department for their work preparing the questionnaire and processing firms’ responses. Finally, we would
like to thank Samuel Hurtado and José Luis Herrera for their help in the processing of the data. For useful
comments, we thank an anonymous referee and Federico Curci.

Documentos de Trabajo. N.º 2120
May 2021
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© BANCO DE ESPAÑA, Madrid, 2021

ISSN: 1579-8666 (on line)
Abstract

This paper explores the heterogeneity across firms within each sector and region in
the impact of and response to the COVID-19 shock. It relies on a survey conducted by
Banco de España to 4,004 companies in November 2020 matched to very rich balance-
sheet information on firm characteristics. According to our results, the impact of the
COVID-19 shock was larger in the case of small, young and less productive firms located
in urban areas within each sector-region pair. Moreover, these firms resorted relatively
more to public-guaranteed loans, tax deferrals, and furlough schemes (ERTEs). More
indebted companies, which were not hit relatively harder by the shock, also perceived
public-guaranteed loans as very useful. Firms consider that uncertainty represents a key
hindrance to the recovery, but observable characteristics do not explain the variation
in the perception of uncertainty once the impact of the shock is accounted for. Finally,
we use the announcement of the Pfizer vaccine on November 9th 2020 as a natural
experiment to provide evidence that the vaccine announcement increased significantly
firms’ subjective recovery expectations.

Keywords: COVID-19, firms, sales, employment, uncertainty.

JEL classification: D22, L20, L25.
Resumen

Este artículo explora la heterogeneidad del impacto y la respuesta a la crisis del
COVID-19 de las empresas españolas dentro de una misma región y sector. Los datos
utilizados se basan en una encuesta realizada por el Banco de España a 4.004 empresas
en noviembre de 2020, que cruzamos con información de los estados financieros de las
empresas procedente de la Central de Balances del Banco de España. Los resultados
muestran que la facturación y el empleo descendieron más en las empresas pequeñas,
jóvenes y menos productivas localizadas en áreas urbanas. En el caso del empleo,
una mayor ratio de temporalidad se encuentra asociada a mayores descensos de
la ocupación. Además, estas empresas perciben los avales ICO, el aplazamiento
de impuestos y los ERTE como herramientas útiles para mitigar los efectos de la actual
crisis sanitaria. Las empresas más endeudadas también percibieron como muy útiles
los avales ICO, pese a no haber sufrido relativamente más por esta perturbación. Las
empresas consideran que la incertidumbre es uno de los principales factores que ha
condicionado de forma negativa su actividad, pero las características observadas
no pueden explicar la variación en la percepción de la incertidumbre una vez que se
controla por la caída de las ventas. Finalmente, usamos el anuncio de la efectividad de la
vacuna de Pfizer realizado el 9 de noviembre de 2020 como un experimento natural para
mostrar que dicha noticia incrementó de forma significativa las expectativas subjetivas
de recuperación de las empresas.

Palabras clave: COVID-19, empresas, ventas, empleo, incertidumbre.

Códigos JEL: D22, L20, L25.
1           Introduction
                      The global spread of the COVID-19 is having a significant human toll and repre-
          sents an unprecedented shock for the economy, pushing most economies into recession.
          One of the most salient features of the virus-induced economic crisis is the asymmetry
          1
          along Introduction
                several dimensions. Although a pandemic represents a text-book example of an
          ex-ante exogenous and symmetric shock, the actions taken by agents and policymakers
                 The global spread of the COVID-19 is having a significant human toll and repre-
          have resulted in very different economic effects across sectors and regions/countries.1 This
          sents an unprecedented shock for the economy, pushing most economies into recession.
          is so because the scope of social-distancing measures depend on the social interaction in-
          One of the most salient features of the virus-induced economic crisis is the asymmetry
          tensity by sector of activity as well as the severity of the pandemic by region. While this
          along several dimensions. Although a pandemic represents a text-book example of an
          heterogeneity is well-documented, much less is known about the asymmetric effects across
          ex-ante exogenous and symmetric shock, the actions taken by agents and policymakers
          firms within each sector and region. The purpose of this paper is to shed light on this
          have resulted in very different economic effects across sectors and regions/countries.1 This
          issue. In particular, we investigate the heterogeneity of several aspects of the COVID-19
          is so because the scope of social-distancing measures depend on the social interaction in-
          shock across firms: its impact on sales and employment, the firms’ responses to mitigate
          tensity by sector of activity as well as the severity of the pandemic by region. While this
          the shock, their use of available policy instruments, and the main factors hindering firms’
          heterogeneity is well-documented, much less is known about the asymmetric effects across
          activity during the pandemic.
          firms within each sector and region. The purpose of this paper is to shed light on this
                 To this purpose, we use more than 4,000 responses to a new firm-level survey
          issue. In particular, we investigate the heterogeneity of several aspects of the COVID-19
          launched by Banco de España, the so-called EBAE (Encuesta Banco de España sobre
          shock across firms: its impact on sales and employment, the firms’ responses to mitigate
          Actividad Empresarial in Spanish). A unique feature of this survey is that we can use the
          the shock, their use of available policy instruments, and the main factors hindering firms’
          firm identifier to match it to Central de Balances, a firm level data set that contains cash
          activity during the pandemic.
          flow and balance sheet information of the quasi-universe of Spanish firms. Therefore, we
                 To this purpose, we use more than 4,000 responses to a new firm-level survey
          can investigate the impact of and response to the shock on the basis of the responses to
          launched by Banco de España, the so-called EBAE (Encuesta Banco de España sobre
          the survey and depending on firms’ ex-ante characteristics. There are several advantages
          Actividad Empresarial in Spanish). A unique feature of this survey is that we can use the
          of this matched data. First, some of the key variables for our analysis can only obtained
          firm identifier to match it to Central de Balances, a firm level data set that contains cash
          in surveys such as the EBAE, as they are not observed in administrative data. This is
          flow and balance sheet information of the quasi-universe of Spanish firms. Therefore, we
          the case, for instance, of timely information on business activity at the firm level, partic-
          can investigate the impact of and response to the shock on the basis of the responses to
          ularly for SMEs, information about firms’ expectations about future developments, their
          the survey and depending on firms’ ex-ante characteristics. There are several advantages
          evaluation of various policy instruments and their perception of the degree of uncertainty.
          of this matched data. First, some of the key variables for our analysis can only obtained
          Second, matching this survey data with balance sheet data allows us to exploit (exoge-
          in surveys such as the EBAE, as they are not observed in administrative data. This is
          nous) pre-crisis differences in a large set of firms’ characteristics, arguably with a higher
          the case, for instance, of timely information on business activity at the firm level, partic-
          degree of accuracy, and some of which would be hard to elicit from survey data, such as
          ularly for SMEs, information about firms’ expectations about future developments, their
          Total
              1 Factor Productivity (TFP).
               Conceptually, the COVID-19 shock involves simultaneous disruptions to both supply and demand.
          evaluation
          On theIn supply
                         ofside,
                            various
                                 some
                                       policy instruments        and their perception        of thespread
                                                                                                        degree  of uncertainty.
                      particular,    weworkplaces    and businesses are shut variation
                                         exploit within-sector-region           down to halt sothe          of the virus. comes
                                                                                                 that identification       On the
          Second, matching this survey data with balance sheet data allows us to exploit (exoge-
          demand    side, households    are  less willing  to leave  their homes,   either  because    of mobility restrictions  or
          from
          the feardifferences    across which
                    of getting infected,  firms depresses
                                                   operating     in the same
                                                              consumption.        sector the
                                                                              Moreover,     andfallthe  same region.
                                                                                                     in demand   could beArmed
                                                                                                                           further
          nous)    pre-crisis
          exacerbated          differences
                         by theand
                                 increase       in a large setresulting
                                           in unemployment        of firms’ characteristics,         arguably with      a higher
          with this data              identification      strategy, we from aim the
                                                                                  to supply
                                                                                       answershocks
                                                                                                 fourhighlighted    above,
                                                                                                          main questions:   which
                                                                                                                                (i)
          degree of accuracy, and some of which would be hard to elicit from survey data, such as
          represent   the so-called  Keynesian    supply   shocks  in Guerrieri  et  al. (2020).
          what the heterogeneous impact of the COVID-19 shock on firms’ turnover is; (ii) what
                  1
              Conceptually,
          firms’ responses the    COVID-19
                              to this shock shock    involves
                                              are; (iii)       simultaneous
                                                           which             disruptions
                                                                  policy measures      aretodeemed
                                                                                             both supply
                                                                                                     moreand  demand.
                                                                                                            useful   by
          On the supply side, some workplaces and businesses 1are shut down to halt the spread of the virus. On the
          firms forside,
          demand      sustaining  their
                         households      activity;
                                    are less willing (iv)  which
                                                      to leave theirfactors
                                                                      homes,affect
                                                                             either firms’
                                                                                    becauseactivity  therestrictions
                                                                                             of mobility most, with   or
          the fear of getting
          a special   focus oninfected,
                                 firms’which  depresses
                                        recovery        consumption.
                                                   expectations     andMoreover,   the fall in demand could be further
                                                                          uncertainty.
          exacerbated by the increase in unemployment resulting from the supply shocks highlighted above, which
                 Ourthefirst
          represent          set ofKeynesian
                         so-called   results indicates   thatin the
                                              supply shocks         COVID-19
                                                                Guerrieri          shock hit harder small, young
                                                                          et al. (2020).
          and less productive firms within each sector and region. As a consequence, many firms
              7
BANCO DE ESPAÑA       DOCUMENTO DE TRABAJO N.º 2120
          needed to adjust their employment, both in the
                                                     1 extensive margin (firing or hiring) and/or
          in the intensive margin (temporary reduction in the staff thanks to the use of furlough
          schemes - ERTEs). While firms with a larger share of temporary workers decreased more
In particular, we exploit within-sector-region variation so that identification comes
          from differences across firms operating in the same sector and the same region. Armed
          with this data and identification strategy, we aim to answer four main questions: (i)
          what the heterogeneous impact of the COVID-19 shock on firms’ turnover is; (ii) what
          firms’ responses to this shock are; (iii) which policy measures are deemed more useful by
          firms for sustaining their activity; (iv) which factors affect firms’ activity the most, with
          a special focus on firms’ recovery expectations and uncertainty.
                      Our first set of results indicates that the COVID-19 shock hit harder small, young
          and less productive firms within each sector and region. As a consequence, many firms
          needed to adjust their employment, both in the extensive margin (firing or hiring) and/or
          in the intensive margin (temporary reduction in the staff thanks to the use of furlough
          schemes - ERTEs). While firms with a larger share of temporary workers decreased more
          their staff, firms that are larger, more productive and with more savings were able to
          better sustain employment.
                      The second set of results refers to the ways firms have adjusted to the shock: restor-
          ing to e-commerce, reducing investment, introducing teleworking, or firing workers (ex-
          tensive margin of employment). Reduction in investment was the margin most used by
          firms (38%), followed by the implementation of working from home schemes (32%), the
          introduction of e-commerce (22%) and firing workers (18%). Working from home was
          useful for urban, large and young firms, with high share of intangible assets and a large
          share of permanent workers in their staff. E-commerce and the reduction of investment
          was more useful for less productive firms. Finally, firing was more used by firms with a
          large share of temporary workers. While firing of workers is not that widespread, effective
          employment used decreased significantly, as explained in the previous paragraph. This
          suggests that most of the adjustment in employment was done via the intensive margin
          (furlough schemes- ERTEs), which are explored further below.
                      The third set of results explores the role of the COVID-19 policy measures in sus-
          taining firms’ activity. Public guaranteed loans (ICOs) was the most useful measure, with
          nearly 40% of the surveyed firms reporting this policy measure had been important for
          sustaining activity. Furlough schemes (ERTEs) were important for 29% of the respon-
          dents, and tax deferrals and renegotiation of rental payments were deemed useful by 24%
          and 21% of the respondents, respectively. Turning to firm-level heterogeneity, smaller,
          less productive, younger, and more indebted firms resorted more intensively to public
          guaranteed loans (ICOs) and tax deferrals, while medium-sized and less productive firms
          resorted more intensively to furlough schemes (ERTEs).
                      The fourth set of results shows which 2are the main factors affecting firms’ activity.
          Pandemic and political uncertainty take the lead (80% and 77%), followed by the evolution
          of demand (48%), unpaid receivables (34%) and competition pressures (33%), problems in
          access to financing (17%), disruptions in supply chains (13%) and availability of workers
          (10%). Due to the prominent role of uncertainty in this pandemic, we dig deeper into the
          heterogeneity of this uncertainty across firms. However, once we account for the size of
          the shock, observable firm characteristics cannot explain differences in the perception of
          uncertainty.
                      Finally, we make use of the announcement of the Pfizer vaccine effectiveness on
BANCO DE ESPAÑA   8    DOCUMENTO DE TRABAJO N.º 2120
          November 9th 2020, right in the middle of the survey period, as a natural experiment
          to compare the recovery expectations of firms that responded to the survey before and
          after the announcement, and we find that this announcement improved significantly their
heterogeneity of this uncertainty across firms. However, once we account for the size of
          the shock, observable firm characteristics cannot explain differences in the perception of
          uncertainty.
                       Finally, we make use of the announcement of the Pfizer vaccine effectiveness on
          November 9th 2020, right in the middle of the survey period, as a natural experiment
          to compare the recovery expectations of firms that responded to the survey before and
          after the announcement, and we find that this announcement improved significantly their
          prospects of recovery. This finding puts forward evidence that during a pandemic firms
          take into account
          developing         medical
                      countries, and developments
                                      show that thewhen forming shock
                                                    COVID-19     their expectations about economic
                                                                        has had persistent negative
          recovery.on sales, but the response of employment has been mostly along the intensive
          impact
                The Bartik
          margin.     remainder  of the
                             et al.     paper
                                    (2020) useis survey
                                                 organized
                                                         data as follows. A brief
                                                                 for the US       overview
                                                                              to show   thatofthe
                                                                                               the pandemic
                                                                                                   literature
          closes this
          brought      introduction.
                   a significant     Section 2ofpresents
                                  proportion      closures,thejob
                                                                survey
                                                                  cuts details and thefinancial
                                                                       and a fragile    balancesituation
                                                                                                 sheet data.
                                                                                                           of
          SectionBennedsen
          firms.   3 presents the heterogeneity
                              et al. (2020) use in the impact
                                                 a large surveyofon
                                                                  thesmall,
                                                                      shockmedium
                                                                            on turnover,
                                                                                      and and
                                                                                           largethe reac-
                                                                                                  Danish
          tion ofand
          firms   firms’
                     findemployment.
                          evidence thatSection 4.1 shows
                                        firms using       the heterogeneity
                                                     government             of the
                                                                 aid were also     firm
                                                                               those     levelmost
                                                                                      in the   responses
                                                                                                    need,
          to the shocks.
          suggesting thatSection
                           support4.2measures
                                      exploreswere
                                               the heterogeneity  in the useemployment.
                                                   effective in preserving   of the policyBloom
                                                                                           instruments
                                                                                                   et al.
          aimed at
          (2021) usemitigating the negative
                     a panel survey          consequences
                                      of 2,500 SMEs in theof US,
                                                              the COVID-19   shock.
                                                                  and document       Section
                                                                                  smallest    5 looks
                                                                                           offline    at
                                                                                                   firms
          the main factors
          experienced  salesconditioning
                             drops of over firms’
                                              40%activity, with
                                                    compared  to subsection  5.1 focusing
                                                                  less than 10%    for the on  the impact
                                                                                            largest online
          of uncertainty
          firms. Humphrieson et
                             firms’  activity.
                                al. (2020)  use Section 6 shows
                                                 survey data      causalthe
                                                             to assess    evidence
                                                                            impact ofof the impact
                                                                                        targeted    of the
                                                                                                 COVID-
          vaccine
          19 policies on SMEs.2 on
                  announcement     firms’
                                 Our      recovery
                                      paper  differsexpectations. Sectionin7that
                                                     from these papers       concludes.
                                                                                 we can match the
          survey responses to very rich balance sheet data of firms, providing us with a variety
          of firm-level heterogeneity
          Literature      review dimensions to look at. Bloom et al. (2020) also match their
          survey data to Amadeus database to discern the impact of the COVID-19 shock on TFP.
                 The paper contributes to the flourishing literature studying the impact of COVID-19
          Our paper differs from theirs in that our sample is more representative, including small
          on businesses. Although studies examining the impact of previous pandemics on business
          and very small firms, and that we focus on the heterogeneous impact of the shock using
          activity are quite limited and typically focus on macroeconomic indicators (see Turner &
          a broader set of heterogeneity measures, such as age, debt, cash holdings, etc. This is
          Akinremi (2020) for a review), a rapidly growing literature on the economic consequences
          also an important difference with respect to other readily available data sources, such as
          of COVID-19 and government response is emerging since the outbreak of the pandemic.
          Chetty et al. (2020), that analyze heterogeneity at group levels (area, industry, income
          The closest papers to ours are those using survey data to understand the impact of
          level, business size), but are not suitable for exploring heterogeneity in other dimensions,
          the COVID-19 shock on firms. Apedo-Amah et al. (2020) perform a survey focused on
          such as productivity or indebtedness.
          developing countries, and show that the COVID-19 shock has had persistent negative
                 This paper is also related to the literature dealing with the impact of the COVID-19
          impact on sales, but the response of employment has been mostly along the intensive
          shock on subjective perceptions and uncertainty.3     Altig et al. (2020) use several macroe-
          margin. Bartik et al. (2020) use survey data for the US to show that the pandemic
          conomic uncertainty indicators for the US and UK to show a huge uncertainty increase in
          brought a significant proportion of closures, job cuts and a fragile financial situation of
          reaction to the pandemic, but with different peak amplitudes and time paths in these two
          firms. Bennedsen et al. (2020) use a large survey on small, medium and large Danish
          countries. One of their uncertainty measures also relies on subjective uncertainty mea-
          firms and find evidence that firms using government aid were also those in the most need,
          sures computed from business expectation surveys, which shows that sales uncertainty
          suggesting that support measures were effective in preserving employment. Bloom et al.
          rose by more than 100%. Furthermore, Barrero & Bloom (2020) argue this huge increase
          (2021) use a panel survey of 2,500 SMEs in the US, and document smallest offline firms
          in uncertainty might be slowing the subsequent recovery and reducing the impact of policy
          experienced sales drops of over 40% compared to less than 10% for the largest online
          measures taken. Buchheim et al. (2020) show with a panel of German firms that firms that
          firms. Humphries et al. (2020) use survey data to assess the impact of targeted COVID-
          perceived higher uncertainty, proxied by the perception of shutdown lasting longer, were
          19 policies on SMEs.2 Our paper differs from these papers in that we can match the
          more likely to implement strong measures like layoffs or canceling investments. Our pa-
          survey responses to very rich balance sheet data of firms, providing us with a variety
          per contributes to this strand of literature by showing that, once the shock is accounted
          of firm-level heterogeneity dimensions to look at. Bloom et al. (2020) also match their
                  2
                      There is a growing number of papers using survey data to assess the impact of COVID-19 of firms,
          survey data to Amadeus database to discern the impact of the COVID-19 shock on TFP.
          which are not listed here for the sake of brevity.
          Our paper differs from theirs in that our sample is more representative, including small
          and 9very small firms, and that we focus on the heterogeneous impact of the shock using
BANCO DE ESPAÑA         DOCUMENTO DE TRABAJO N.º 2120

                                                      4
          a broader set of heterogeneity measures, such as age, debt, cash holdings, etc. This is
          also an important difference with respect to other readily available data sources, such as
firms. Humphries et al. (2020) use survey data to assess the impact of targeted COVID-
          19 policies on SMEs.2 Our paper differs from these papers in that we can match the
          survey responses to very rich balance sheet data of firms, providing us with a variety
          of firm-level heterogeneity dimensions to look at. Bloom et al. (2020) also match their
          survey data to Amadeus database to discern the impact of the COVID-19 shock on TFP.
          Our paper differs from theirs in that our sample is more representative, including small
          and very small firms, and that we focus on the heterogeneous impact of the shock using
          a broader set of heterogeneity measures, such as age, debt, cash holdings, etc. This is
          also an important difference with respect to other readily available data sources, such as
          Chetty et al. (2020), that analyze heterogeneity at group levels (area, industry, income
          level, business size), but are not suitable for exploring heterogeneity in other dimensions,
          such as productivity or indebtedness.
                  This paper is also related to the literature dealing with the impact of the COVID-19
          shock on subjective perceptions and uncertainty. Altig et al. (2020) use several macroe-
          conomic uncertainty indicators for the US and UK to show a huge uncertainty increase in
          reaction to the pandemic, but with different peak amplitudes and time paths in these two
          countries. One of their uncertainty measures also relies on subjective uncertainty mea-
          sures computed from business expectation surveys, which shows that sales uncertainty
          rose by more than 100%. Furthermore, Barrero & Bloom (2020) argue this huge increase
          in uncertainty might be slowing the subsequent recovery and reducing the impact of policy
          measures taken. Buchheim et al. (2020) show with a panel of German firms that firms that
          perceived higher uncertainty, proxied by the perception of shutdown lasting longer, were
          more likely to implement strong measures like layoffs or canceling investments. Our pa-
          per contributes to this strand of literature by showing that, once the shock is accounted
          for,2 There
                observable    characteristics
                      is a growing            cannot
                                   number of papers    explain
                                                    using survey any  differences
                                                                 data to            in perceived
                                                                         assess the impact        uncertainty.
                                                                                           of COVID-19 of firms,
          which are not listed
          Furthermore,         here for the
                           we provide       sake of
                                         causal     brevity. of the impact of the vaccine announcement on
                                                 evidence
          subjective firm level recovery expectations. On this front, our results complement those
          of Heap et al. (2021), who find that the vaccine
                                                    4      announcement decreased the trust in
          government and elected politicians.
                  Finally, this paper is also related to the literature about the impact of COVID-19 on
          firms at different margins: incumbent’s firm behaviour (Brotherhood & Jerbashian, 2020,
          Barrero et al., 2020 ); liquidity needs, credit constraints and solvency of firms (Schivardi
          & Guido, 2020, Balduzzi et al., 2020, Greenwald et al., 2020, Blanco et al., 2020), the
          efficiency of policies implemented to mitigate the COVID-19 shock (Gonzalez-Uribe &
          Wang, 2020, Goodhart et al., 2020, Zoller-Rydzek & Keller, 2020), the entry decision
          (Sedlacek & Sterk, 2020, Albert et al., 2020), among many others.

          2       Data
          2.1      Survey details
                  The survey was launched by Banco de España in November 2020, the so-called
          EBAE (Encuesta Banco de España sobre Actividad Empresarial ), with the purpose of
          monitoring Spanish non-financial corporations’ activity in real time. The participation
              10
          of companies
BANCO DE ESPAÑA
                       is voluntary and responses were collected through a questionnaire sent to
                   DOCUMENTO DE TRABAJO N.º 2120

          firms by e-mail. The survey was carried during the fortnight between the 4th and 19th of
          November 2020. The survey was submitted to a sample of 12,940 Spanish non-financial
The survey was launched by Banco de España in November 2020, the so-called
          EBAE (Encuesta Banco de España sobre Actividad Empresarial ), with the purpose of
          monitoring Spanish non-financial corporations’ activity in real time. The participation
          of companies is voluntary and responses were collected through a questionnaire sent to
          for, observable
          firms by e-mail. characteristics
                            The survey wascannot
                                           carriedexplain any fortnight
                                                   during the  differences in perceived
                                                                        between  the 4th uncertainty.
                                                                                         and 19th of
          Furthermore,
          November       we The
                     2020.   provide causal
                                  survey wasevidence  of the
                                              submitted   to aimpact
                                                               sampleofofthe vaccine
                                                                          12,940     announcement
                                                                                 Spanish  non-financial on
          subjective firmand
          corporations,    level
                              werecovery
                                 received expectations.  On this front,
                                           4,004 valid responses, which our  results complement
                                                                          represents a response ratethoseof
          Questionnaire
          of HeapFigure
          30,9%.   et al. 10
                           (2021), who find
                             of Appendix  A.1that thethe
                                               shows   vaccine  announcement
                                                          responses                  3
                                                                    received bydecreased
                                                                                 day. Theretheis trust  in
                                                                                                  a slight
          government   and elected
          over-representation
                The survey           politicians.
                                of some
                              included  a sectors
                                           total of(e.g.  manufacturing)
                                                    8 questions,            and
                                                                   split into twolarge firms
                                                                                   parts.    (see firms
                                                                                           First,  Appendix
                                                                                                        were
                Finally, this paper  is also related to  the literature about  the  impact of COVID-19
          A.1). about their views on the current and future evolution of business turnover, employ-
          asked                                                                                           on
          firms Survey
          ment, at
                 anddifferent
                       input     margins:
                          responses
                               and   output incumbent’s
                                       aggregated
                                              prices,atasthefirm
                                                          well    behaviour
                                                              sectoral
                                                                the effect     (Brotherhood
                                                                        andofregional
                                                                               some              & Jerbashian,
                                                                                        level capture
                                                                                      general  factors well       2020,
                                                                                                             the recent
                                                                                                        affecting their
          Barrero
          activity, et
          developments  al.,
                    such as   2020
                             in the ); liquidity
                                the demand        needs,
                                     Spanish changes,      credit
                                                economy.access     constraints
                                                             For instance,
                                                                   to external evenand solvency
                                                                                      at a high
                                                                                   financing,     of firms
                                                                                                 degree
                                                                                               supply       (Schivardi
                                                                                                          of disaggre-
                                                                                                        disruptions  or
          & Guido,
          gation
          economic     2020,
                       regional Balduzzi
                  at uncertainty,          et al.,
                                   or industry
                                       among        2020,A
                                                   level,
                                                others.     Greenwald
                                                           survey
                                                              second   setetofon
                                                                    figures   al.,  2020, Blanco
                                                                                   employment
                                                                               questions           et calibrate
                                                                                           aimedgrowth
                                                                                                   to  al., are
                                                                                                            2020),  the
                                                                                                                 highly
                                                                                                                  more
          efficiency the
          correlated
          precisely   of policies
                       with thoseofimplemented
                         impact     ofand
                                       other       to mitigate
                                          the sources
                                               response (see       the 9COVID-19
                                                              Figure
                                                          to the              crisis.shock
                                                                         in Appendix
                                                                  COVID-19            InA.1).(Gonzalez-Uribe
                                                                                                It is worth
                                                                                          particular,           &
                                                                                                            high-
                                                                                                       companies
          Wang,
          lighting
          were     2020,
                    that
                 asked    Goodhart
                          both
                       about  the      et al.,
                                thedegree
                                     survey    2020,
                                            ofand  thisZoller-Rydzek
                                               uptake    paper
                                                        of       focus
                                                           support       & the
                                                                        on  Keller,
                                                                     measures,  how2020),
                                                                               intensive      thenormal
                                                                                            margin,
                                                                                       far from    entry decision
                                                                                                      namely,  the
                                                                                                          activity
          (Sedlacek                            4
                  they&were,
          performance
          levels         Sterk,  2020,
                                    howAlbert
                         of surviving
                              and         long itetwill
                                        firms.      al., take
                                                         2020),them
                                                                 among    many
                                                                      to get    others.
                                                                             back   to normal. Appendix A.2
          contains
             3
                     the full questionnaire,
               The distribution                   andthe
                                of firms that received in survey,
                                                           each ofthethe   following
                                                                      distribution      subsections
                                                                                   of firms           we detail
                                                                                            that responded        the
                                                                                                           the survey,
          and its comparison to aggregate data can be found on Appendix A.1.
          Questionnaire
          questions
          2 4 Data    used.
                  Indeed, non-responses to the survey may reflect companies that have closed permanently as a result
                   The survey included a total of 8 questions, split into two parts. First, firms were
          2.2   Balance
          2.1 about
                Survey     sheet   data:   Central  5 de Balances Integrada
          asked     their details
                          views on the current and future evolution of business turnover, employ-
          ment,Data
                 and input
                The          and
                              wasoutput
                       on firm-level
                      survey              prices,
                                      responses
                                    launched      asBanco
                                               byto  well the
                                                            de effect
                                                     the survey       of some
                                                                   is combined
                                                                España        general     factors
                                                                                             2020, affecting
                                                                                 with information
                                                                          in November               the on   their
                                                                                                            firms’
                                                                                                         so-called
          activity, such as
          characteristics
          EBAE (Encuesta     the
                          that  isdemand
                               Banco       changes,
                                   available
                                       de España     access
                                             at a yearly
                                                    sobre     to external
                                                          frequency
                                                            Actividad  from financing,
                                                                             the Central
                                                                         Empresarial    ), supply  disruptions
                                                                                             Balance
                                                                                            with  the Sheet     or
                                                                                                             Data
                                                                                                       purpose  of
          economic
          (CBI,
          monitoring uncertainty,
                 Central
                       Spanish      among
                          de Balances       others.
                                         Integrada),
                                  non-financial      Awhich
                                                        secondis set
                                                 corporations’        of questions
                                                                  sourced
                                                                  activity  from
                                                                            in        aimed
                                                                               realfirms’
                                                                                      time.    to calibrate
                                                                                            voluntary
                                                                                               The           more
                                                                                                        responses
                                                                                                    participation
          precisely
          to
          of Banco  the impact
                     de España
             companies          of and and
                                Central
                         is voluntary   the  response
                                          Balance       towere
                                                    Sheet
                                             responses     the COVID-19
                                                            Data           crisis. surveys
                                                                 Office (CBSO)
                                                               collected  through  In
                                                                                    a particular,
                                                                                            and thecompanies
                                                                                       questionnaire Spanish
                                                                                                       sent to
          were
          firms asked
          Mercantile  about  thedata;
                       Registry
                by e-mail.  The   degreethe
                                 survey   of ultimate
                                         was uptake
                                               carriedofduring
                                                         support
                                                        sources  ofmeasures,
                                                               the   the datahow
                                                                    fortnight  are far from
                                                                                    therefore
                                                                              between        normal
                                                                                               theand
                                                                                         the 4th      activity
                                                                                                    Banco
                                                                                                       19th de
                                                                                                            of
          levels
          Españathey
          November     were,
                   and2020.  and survey
                                 howMercantile
                        the Spanish
                             The       long
                                         wasit submitted
                                                willand
                                                     takeProperty
                                                           them   to Registrars’
                                                                     get back
                                                            to a sample         toAssociation.
                                                                          of 12,940normal.
                                                                                     SpanishAppendix
                                                                                                This isA.2an
                                                                                              non-financial
          contains  the full
          administrative
          corporations,  and questionnaire,
                          database           and valid
                                    that contains
                              we received  4,004   in  each  of the
                                                    information  on following
                                                         responses,  firms’     subsections
                                                                      which financial         we detail
                                                                                      statements
                                                                             represents              ratethe
                                                                                                  (required
                                                                                         a response        of
          questions
          by law to
          30,9%.    used.
                    be submitted
                 Figure          to the A.1
                        10 of Appendix  commercial  registry)
                                            shows the         as received
                                                      responses  well as on  day.3income
                                                                          bytheir   There corporate
                                                                                          is a slight
          tax  returns. The data
          over-representation       coverssectors
                                of some     around(e.g.
                                                    90%manufacturing)
                                                        of firms in the and
                                                                        non-financial  market
                                                                             large firms       economy
                                                                                         (see Appendix
          2.2
          for      Balance
              all size
          A.1).                sheet
                       categories,      data:
                                   including  bothCentral    de number
                                                   turnover and Balances       Integrada
                                                                         of employees.  The correlation
          between     micro-aggregated
                  Survey                      employment
                           responses aggregated       at the and     output
                                                               sectoral        growth and
                                                                          and regional   levelthe    National
                                                                                                 capture          Accounts
                                                                                                           well the   recent
                  Data on firm-level responses to the survey is combined with information on firms’
          counterparts
          developmentsisinabove         0.90 (seeeconomy.
                                the Spanish        Almunia For et al.  (2018) for
                                                                    instance,   evenmore
                                                                                       at adetails).    The approach
                                                                                              high degree      of disaggre-of
          characteristics that is available at a yearly frequency from the Central Balance Sheet Data
          matching
          gation at CBI      and survey
                        regional            data enables
                                   or industry      level, us  to explore
                                                             survey         theonrole
                                                                      figures         of firms’ characteristics,
                                                                                    employment                        which
                                                                                                      growth are highly
          (CBI, Central de Balances Integrada), which is sourced from firms’ voluntary responses
          would    be difficult
          correlated             to replicate
                        with those      of otherinsources
                                                    a survey,   along
                                                             (see Figureseveral
                                                                            9 in dimensions
                                                                                  Appendix A.1).observedIt isinworth
                                                                                                                the survey,
                                                                                                                       high-
          to Banco de España Central Balance Sheet Data Office (CBSO) surveys and the Spanish
          such   as the
          lighting   thatimpact
                            both theof COVID-19
                                         survey andon  thisturnover    and employment,
                                                              paper focus    on the intensive sincemargin,
                                                                                                      this information
                                                                                                               namely, the is
          Mercantile Registry data; the ultimate sources of the data are therefore the Banco de
          only   availableofinsurviving
          performance                       firms.4 registers with a sizable lag, firms’ perception of policies
                                 administrative
          España and the Spanish Mercantile and Property Registrars’ Association. This is an
          to tackle
              3       the crisisofand
                The distribution     firmsthe
                                           thatdegree
                                                receivedofthe
                                                            uncertainty    about future
                                                              survey, the distribution       developments.
                                                                                       of firms  that responded After    the
                                                                                                                  the survey,
          administrative      database    that  contains    information    on firms’ financial     statements     (required
          and its comparison
          match    EBAE-CBI,    to aggregate
                                   we end up   data can 3,584
                                                  with  be found   on Appendix A.1.
                                                                observations.
          by law
              4     to be
                Indeed,    submittedtotothe
                         non-responses        the commercial
                                                survey may reflectregistry)
                                                                     companiesasthat
                                                                                 wellhave
                                                                                       as on    their
                                                                                            closed     income corporate
                                                                                                    permanently   as a result
          of
          taxthereturns.
                  COVID-19    shock.
                            The   data With respect
                                         covers      to the 90%
                                                 around     extensive margininand
                                                                 of firms      theinnon-financial
                                                                                    line with our findings
                                                                                                     marketbelow  for the
                                                                                                              economy
          intensive margin, Social Security records shows that small firms have been hit harder by the COVID-19
          for  all the
          shock:    sizenumber
                         categories,   including
                                for firms with less both  turnover
                                                    than 49       5 and
                                                             employees    numberbyof-3.3%
                                                                       decreased        employees.    Thethe
                                                                                            in 2020 while  correlation
                                                                                                              fall in the
          case  of larger firms (>500   emp.)  was  only -1.4%.
          between micro-aggregated employment and output growth and the National Accounts
          counterparts is above 0.90 (see Almunia et al. (2018) for more details). The approach of
             11
BANCO DE ESPAÑA     DOCUMENTO DE TRABAJO N.º 2120
                                                     6
          matching CBI and survey data enables us to explore the role of firms’ characteristics, which
          would be difficult to replicate in a survey, along several dimensions observed in the survey,
          such as the impact of COVID-19 on turnover and employment, since this information is
(CBI, Central de Balances Integrada), which is sourced from firms’ voluntary responses
          to Banco de España Central Balance Sheet Data Office (CBSO) surveys and the Spanish
          Mercantile Registry data; the ultimate sources of the data are therefore the Banco de
          España and the Spanish Mercantile and Property Registrars’ Association. This is an
          administrative database that contains information on firms’ financial statements (required
          by law to be submitted to the commercial registry) as well as on their income corporate
          tax returns. The data covers around 90% of firms in the non-financial market economy
          for all size categories, including both turnover and number of employees. The correlation
          between micro-aggregated employment and output growth and the National Accounts
          counterparts is above 0.90 (see Almunia et al. (2018) for more details). The approach of
          matching CBI and survey data enables us to explore the role of firms’ characteristics, which
          would be difficult to replicate in a survey, along several dimensions observed in the survey,
          such as the impact of COVID-19 on turnover and employment, since this information is
          only available in administrative registers with a sizable lag, firms’ perception of policies
          to tackle the crisis and the degree of uncertainty about future developments. After the
          match EBAE-CBI, we end up with 3,584 observations.
                 For each firm,
          of the COVID-19     shock.among   other to
                                      With respect variables,  we observe
                                                      the extensive          theinfirm’s
                                                                    margin and            sector
                                                                                    line with     of activity
                                                                                              our findings     (4-digit
                                                                                                           below for the
          intensiveRev.
          NACE      margin,   Social Security
                           2 code),   locationrecords shows
                                                (5-digit zipthat  small
                                                              code),    firms havematerial
                                                                      turnover,      been hit expenditures,
                                                                                              harder by the COVID-19
                                                                                                               number
          shock: the number for firms with less than 49 employees decreased by -3.3% in 2020 while the fall in the
          of
          caseemployees,     share
               of larger firms  (>500of emp.)
                                         temporary   employees,
                                              was only -1.4%.       age, debt ratio (interest-bearing borrowed
          funds to interest-bearing liabilities), share of intangible assets, the ratio of cash to total
          assets, and total fixed assets. Moreover, from
                                                      6 these variables we compute a measure of
          total factor productivity (TFP) for each firm.

          2.3       A first glimpse at the data
                  Table 1 presents some descriptive statistics at the sector level for the main variables
          of interest in our analysis. In particular, it provides figures on two sets of variables:
          responses to the survey (columns 1 and 2), and firm characteristics (columns 3-10). From
          Panel A, it is worth emphasizing the wide heterogeneity across sectors in both the average
          impact of the shock and the average firm characteristics. For instance, the average firm
          in manufacturing experienced a fall of -12.66% in turnover against the -45.53% fall for
          the average firm operating in the hospitality sector (-5.49% and -34.97% for employment,
          respectively). Also, the average firm in manufacturing is 33% more productive than that
          of hospitality (log TFP 1.28 versus 0.95), 8 years older, more rural (26% hospitality firms
          are out of cities against 44% manufacturing firms), less indebted, holds less cash and are
          much larger in terms of employees.
                  While heterogeneity across sectors is well-known, Panel B of Table 1 documents a
          more interesting and potentially more important source of heterogeneity, that is, hetero-
          geneity across firms within the same sector, which is the main focus of the paper. In
          particular, it uncovers huge variation across firms within each sector as measured by the
          interquartile range (IQR) given by the difference between the 75th and the 25th per-
          centiles. For example, the TFP difference between the 75th percentile and the 25th in
          the administrative services sector is even larger than the difference between the average
          firm in manufacturing and hospitality from the table above: 0.54 against 0.33 (0.33=1.28-
          0.95).
              12 This indicates that, while the average manufacturing firm is 33% more productive
BANCO DE ESPAÑA    DOCUMENTO DE TRABAJO N.º 2120

          that the average hospitality firm, the 75th percentile firm in administrative services is 54%
          more productive than the 25th percentile firm in the same sector. In terms of age, the
interquartile range (IQR) given by the difference between the 75th and the 25th per-
        centiles. For example, the TFP difference between the 75th percentile and the 25th in
        the administrative services sector is even larger than the difference between the average
        firm in manufacturing and hospitality from the table above: 0.54 against 0.33 (0.33=1.28-
        0.95). This indicates that, while the average manufacturing firm is 33% more productive
        that the average hospitality firm, the 75th percentile firm in administrative services is 54%
        more productive than the 25th percentile firm in the same sector. In terms of age, the
        manufacturing-hospitality average gap is 9 years, while the 75th-25th gap within admin.
        services is 17 years. Regarding the cash holdings of firms, and hence the starting buffer
        against the shock, there is also substantial heterogeneity, with the 75th percentile of firms
        in thevs
        (0.36  IT0.03).
                  services
                        5
                          Weholding
                              show ina Table
                                       share that
                                             9 on is 10 timesBlarger
                                                  Appendix            than that
                                                                that these       of thestatistics
                                                                            summary      25th percentile
                                                                                                  remain
                        5
        (0.36 vs 0.03).similar
        qualitatively     We show
                               if weinuse
                                       Table 9 on Appendix
                                          weights            B that
                                                  to match the       these summary
                                                                  sector-size          statistics
                                                                              distribution.       remain
                                                                                              In light of
        qualitatively
        these  figures, similar
                         it seemsif crucial
                                    we use to
                                            weights
                                                bettertounderstand
                                                         match the the
                                                                     sector-size distribution.
                                                                         heterogeneity         In light of
                                                                                        of the COVID-19
                                                          7
        these figures,
        shock  and the itresponses
                            seems crucial
                                     across to  better
                                             firms      understand
                                                   within           the something
                                                           each sector,  heterogeneity  of the COVID-19
                                                                                    we investigate further
        shock                         Table   1: Summary    statistics by sector
        in the and  the responses
                remaining            across firms within each sector, something we investigate further
                             of the paper.
        in the
           PANELremaining
                   A         of the paper.
            Averages               ∆           ∆        log     Age     Rural      Temp.      Intangible    Debt      Size     Cash
                                Turnover      Emp      TFP                         Workers      capital     Ratio    (Emp)     ratio
        3 Manufacturing
             The impact -12.66
                               of
                               -5.49
                                     the
                                      1.28
                                           COVID-19
                                            29.03 0.44 0.12
                                                            shock
                                                               0.09
                                                                    across
                                                                      0.31
                                                                              firms
                                                                           142.34 0.12
        3 Construction
             The impact -12.23 of
                               -5.20 the
                                      1.18 COVID-19
                                            21.86 0.27 0.30 shock
                                                               0.16 across
                                                                      0.28    firms
                                                                           39.58  0.15
           Trade               -15.55
              In order to assess        the-7.34impact
                                                    0.84 of25.67
                                                             COVID-19 0.26   on0.13businesses,
                                                                                           0.13 we 0.30
                                                                                                      rely on63.37    0.15 6
                                                                                                                 question
           Transport           -16.34      -8.34    1.99    24.15     0.29     0.20        0.11      0.35   119.90    0.14
        of theInsurvey,
                   order to
           Hospitality         assess
                             which      the
                               -45.53reads    as
                                          -34.97impact
                                                    0.95 of20.76
                                                  follows:   COVID-19
                                                              ‘How0.26       on0.29businesses,
                                                                        are your    firms’0.10    we 0.36
                                                                                             turnover rely
                                                                                                         andon   question
                                                                                                                      0.17 6
                                                                                                              employment
                                                                                                             38.02
           IT services         -11.33      -3.29    1.51    18.57     0.08     0.16        0.42      0.22    78.38    0.22
        of the
        in Real  survey,compared
           the estate
                4Q20         which
                               -10.27reads
                                      to the  assame
                                           -3.23  follows:
                                                    1.11period‘How
                                                            23.37       are
                                                                  last0.14  your
                                                                         year?      firms’that
                                                                               ’. Note
                                                                               0.05          turnover
                                                                                           0.05  while   and 6.03
                                                                                                              employment
                                                                                                     0.26turnover   is0.12
                                                                                                                        more
           Prof. services      -10.03      -5.01    1.70    19.34     0.13     0.12        0.25      0.24    45.68    0.24
        in the 4Q20
        informative
           Admin.         compared
                         about
                    services     the to
                               -16.84     theof same
                                      size-11.92 the1.77 period
                                                      shock    the
                                                            17.98 lastfirm
                                                                         year?
                                                                      0.16     ’. Notethe
                                                                            received,
                                                                               0.22       that   while
                                                                                           0.26change    turnover
                                                                                                        in
                                                                                                     0.31   254.79 is0.23
                                                                                                           employment   more
                                                                                                                           is
           Other services      -32.23     -19.42    1.30    19.36     0.21     0.24        0.19      0.28    50.50    0.24
        informative
        more          aboutabout
               informative   the size
                                    theofreaction
                                           the shock     the firm
                                                   of23.71
                                                        the   firm to
                                                                    received,
                                                                      the      the change
                                                                            shock.           in employment
                                                                                    The question               is
                                                                                                     specifically
           Total           -16.10    -8.58    1.25            0.27     0.17      0.15     0.29    85.32   0.16
        more
        asked informative   about
                about the total     the reaction
                                 change            of the firm
                                          in employment      used,tothat
                                                                      theis,shock.  The the
                                                                              including  question    specifically
                                                                                              extensive  margin
            Obs                   3,523      3,457     3,161    3,584    3,584      3,160       3,584       3,584    3,584     3,582
        asked about(hiring
        adjustment   the total
                            or change   in employment
                               firing), and              used,
                                             the intensive     thatadjustment
                                                           margin   is, including the extensive
                                                                                (workers        margin
                                                                                         on temporary
           PANEL B
        adjustment  (hiring
        leave through       or firing),
                       furlough  schemesand- the intensive
                                             ERTEs).       margin
                                                       There   wereadjustment
                                                                    ten possible(workers
                                                                                  answersonexpressed
                                                                                             temporary
                                                                                                     in
            IQRs                    ∆          ∆        log     Age     Rural      Temp.      Intangible    Debt      Size     Cash
        leave through
        intervals,       furlough
                    depending     onschemes
                            Turnover  the     -TFP
                                                ERTEs).
                                       Emppercentage        Theredecrease/increase.
                                                         change      were
                                                                      Workersten possible
                                                                                   capital  answers   expressed
                                                                                                           ratio in
                                                                                             The distribution
                                                                                             Ratio  (Emp)        of
        intervals,
        responses   depending
           Manufacturing        inonFigure
                    is shown22.50     the
                                       7.50percentage
                                            1. 0.20      change
                                                     17.00
                                                 A first  look1.00atdecrease/increase.
                                                                     the0.17distribution
                                                                                    0.04   ofThe
                                                                                              the distribution
                                                                                             0.45    65.62
                                                                                                   reported 0.16 of
                                                                                                              year-
            Construction          22.50       2.50     0.36     16.00       1.00    0.50         0.03       0.48     31.06      0.21
        responses
        on-year       is shown
           Trade turnover       in Figure
                             changes
                             22.50          1. 0.17
                                       (Panel
                                       7.50      A first
                                                 A)  18.00look
                                                    reveals     at the
                                                             that
                                                             1.00  the   distribution
                                                                      0.18         firmsofdeclared
                                                                          bulk of0.06      the reported
                                                                                          0.53             year-
                                                                                                     a negative
                                                                                                 36.00   0.19
           Transport         22.50     7.50    0.39  16.00   1.00     0.26       0.02     0.56   43.00   0.16
        on-year
        impact    turnover
                 of
           Hospitality       changes
                      COVID-19         (Panel
                             20.00 (63%),
                                      52.50 whileA)24%
                                               0.23 reveals  thatnothe
                                                         report
                                                     17.00   1.00     0.30bulk of
                                                                     change.    In firms
                                                                                 0.01     declared
                                                                                     contrast,
                                                                                          0.61 Panel aB
                                                                                                 31.80 negative
                                                                                                         shows
                                                                                                         0.20
            IT services           22.50       2.50     0.52     14.00       0.00    0.21         0.96       0.40     63.00      0.33
        impact
        that only
           Real   of 38%
                estateCOVID-19 12.50 (63%),
                           of respondents     while
                                                 0.71 24%
                                         0.00 report        report
                                                       having
                                                        14.00   0.00 no change.
                                                               decreased           In
                                                                                    0.00contrast,
                                                                            their employment,
                                                                         0.00                     Panel
                                                                                             0.42 and   54%
                                                                                                      2.05  B report
                                                                                                              shows
                                                                                                              0.14
           Prof. services      22.50     2.50    0.36   14.00   0.00     0.15       0.39     0.41    29.88    0.35
        that onlyservices
        no Admin.
           change.   38%
                      6    of respondents
                         These  patterns
                               40.00          report
                                           suggest
                                        12.50          having
                                                 0.54 that     decreased
                                                           firms
                                                        17.00     have been
                                                                0.00        their
                                                                         0.32 ableemployment,
                                                                                    to absorb
                                                                                    0.50          and
                                                                                                part
                                                                                             0.53     of54%
                                                                                                     47.76    report
                                                                                                          the shock,
                                                                                                              0.31
        no Other
        since
                 services
           change.   6
                        These52.50
              their employment
                                     40.00
                              patterns      0.50
                                        suggest
                                   decreased
                                                   16.00
                                                 that
                                              less    firms
                                                    than
                                                           0.00
                                                             have
                                                          their
                                                                   0.30
                                                                  been
                                                                sales.  able 0.14    0.53
                                                                             to absorb  part45.00   0.32
                                                                                             of the shock,
           Total             22.50    7.50  0.64   17.00   1.00    0.24      0.07    0.51   42.25   0.21
        since To
              their   employment
                   analyze         decreased
                            the type          less than
                                     of firms most        their sales.
                                                     impacted   by the COVID-19 shock, we investigate
            Obs                   3,523      3,457     3,161    3,584    3,584      3,160       3,584       3,584    3,584     3,582
        whichTo    analyze
                firm          the type (productivity,
                      characteristics     of firms most impacted
                                                              age, shareby  of the  COVID-19
                                                                               temporary           shock,
                                                                                              workers,      we investigate
                                                                                                         intangible    assets
        Source:
        which   EBAE
                firm  survey and Central
                      characteristics     de Balances Integrada.
                                          (productivity,      age, share    of temporary      workers,   intangible
        share,   indebtedness,
        Notes: Panel                cash and
                     A shows the averages  ratio
                                              Paneland
                                                    B thesize)   correlate
                                                           interquantile rangeswith  the asfall
                                                                                (measured       in activity
                                                                                             p75-p25 within the at  theassets
                                                                                                                industry). firm
                                                                                                                            The
        share,     indebtedness,
        first column
        level.    In                   cash
                     of both tables corresponds
                     particular,     our       ratio   andchange
                                                  to yearly   size)incorrelate
                                                                      turnover, andwith
                                                                                      of athethe
                                                                                      the second  fall intoof
                                                                                                  column   activity
                                                                                                            the yearly at  thein firm
                                                                                                                       change
        employment.   Column 3, 4 and    5 baseline
                                           correspond specification
                                                       to log TFP, age ofconsists
                                                                           the firm, and      regression
                                                                                               dummy variable either   turnover
                                                                                                              indicating the        or
        level.    In
        headquarters particular,     our
                      are in rural areas.  baseline
                                          Column       specification
                                                   6 shows                consists
                                                            the share of temporary    of  a
                                                                                     workers. regression
                                                                                                Column 7, 8of
        employment growth of firm i (yi ) on a vector of firm characteristics (Xi ) as well as different      either
                                                                                                            and 10 showturnover
                                                                                                                         the share ofor
        intangible capital (intangible capital over total capital), the debt ratio (total debt over total assets), and the cash ratio
        employment
        configurations    growth
        (cash over total assets)    of firm
                             of respectively.
                                 sector       i (yi ) on
                                              Column
                                          s (NACE         a vector
                                                      9 shows
                                                        rev          of firm
                                                                        andbycharacteristics
                                                              size, measured
                                                             2-digit)                          (Xi ) as well
                                                                              the number of employees.
                                                                             region  j (Autonomous           as different
                                                                                                         Communities)
        configurations
        fixed effects (γs,j  of):sector s (NACE rev 2-digit) and region j (Autonomous Communities)
        fixed
            5
              effects (γs,j ):
                  Note that the number of observations differs depending on which explanatory variable we look at. We
           show5 Note
                  in Table
                       that 8theonnumber
                                     Appendix         B that the results
                                                  of observations   differs are qualitatively
                                                                            depending         similar
                                                                                        on which      if we keep
                                                                                                  explanatory    only the
                                                                                                               variable weobservations
                                                                                                                            look at. We
           for which
           show        we have
                  in Table   8 onall     the regresors
                                     Appendix         B thatofthe
                                                               interest
                                                                  results(2,715  observations).
                                                                            are qualitatively similar if we keep only the observations
                6
                  This we
           for which    ‘inaction
                            have allrange’         masks aofvast
                                         the regresors              heterogeneity
                                                               interest             between sectors: while only 16.5% of firms in
                                                                         (2,715 observations).
           hospitality
                6
                  This    services claim
                        ‘inaction     range’      amasks
                                                    no change
                                                          a  vastin heterogeneity
                                                                     their employment     withsectors:
                                                                                    between     respect while
                                                                                                         to theonly
                                                                                                                previous
                                                                                                                     16.5%year,   82% in
                                                                                                                             of firms  of
BANCO DE ESPAÑA  13 DOCUMENTO DE TRABAJO N.º 2120
           the firms inservices
           hospitality     the realclaimstate asector    have been
                                                    no change          ableemployment
                                                                 in their    to sustain their
                                                                                          withemployment.
                                                                                                respect to theAlso, aroundyear,
                                                                                                                previous     10%82%of the
                                                                                                                                       of
           respondents
           the  firms in ofthethe   survey
                                 real   statehave     0 employees
                                                  sector have beenand     most
                                                                       able     of themtheir
                                                                             to sustain  claimemployment.
                                                                                                not having changed   their employment.
                                                                                                              Also, around   10% of the
        respondents of the survey have 0 employees and most8of them claim not having changed their employment.
                                                                        9
(0.36 vs 0.03).5 We show in Table 9 on Appendix B that these summary statistics remain
        qualitatively similar if we use weights to match the sector-size distribution. In light of
        these figures, it seems crucial to better understand the heterogeneity of the COVID-19
        shock and the responses across firms within each sector, something we investigate further
        in the remaining of the paper.

        (0.36 vs 0.03).5 We show in Table 9 on Appendix B that these summary statistics remain
        3 The similar
        qualitatively   impact   if we ofuse the
                                             weightsCOVID-19            shockdistribution.
                                                      to match the sector-size    across firms In light of
        (0.36 vs
        these     0.03).5it We
               figures,         show
                            seems      in Table
                                    crucial      9 on Appendix
                                             to better understandB that
                                                                    the these summaryofstatistics
                                                                         heterogeneity             remain
                                                                                          the COVID-19
              In order to assess the impact of COVID-19 on businesses, we rely on question 6
        qualitatively
        shock  and thesimilar    if we
                          responses      use weights
                                      across          to match
                                              firms within      the sector-size
                                                           each sector,         distribution.
                                                                        something              In light
                                                                                   we investigate       of
                                                                                                   further
        of the survey, which reads as follows: ‘How are your firms’ turnover and employment
        these
        in the figures,
                remainingit seems
                             of the crucial
                                     paper. to better understand the heterogeneity of the COVID-19
        in the 4Q20 compared to the same period last year? ’. Note that while turnover is more
        shock and the responses across firms within each sector, something we investigate further
        informative about the size of the shock the firm received, the change in employment is
        in the remaining of the paper.
        3
        more The        impact
              informative     about the ofreaction
                                             the COVID-19
                                                    of the firm to the shock
                                                                        shock. Theacross
                                                                                     question firms
                                                                                              specifically
        asked about the total change in employment used, that is, including the extensive margin
               In order to assess the impact of COVID-19 on businesses, we rely on question 6
        3      The(hiring
        adjustment        impact            of and
                                  or firing),      the the COVID-19                    shock (workers
                                                             intensive margin adjustment              acrossonfirms    temporary
        of the survey, which reads as follows: ‘How are your firms’ turnover and employment
        leave through furlough schemes - ERTEs). There were ten possible answers expressed in
        in theIn4Q20
                   ordercompared
                            to assesstothe  theimpact      of COVID-19
                                                  same period        last year?on’. businesses,
                                                                                     Note that while  we rely      on question
                                                                                                               turnover    is more6
        intervals, depending on the percentage change decrease/increase. The distribution of
        of the survey,
        informative         which
                         about   thereads
                                        size ofas the
                                                    follows:
                                                        shock ‘Howthe firmare received,
                                                                              your firms’  theturnover
                                                                                                  change inand       employment
                                                                                                                  employment      is
        responses is shown in Figure 1. A first look at the distribution of the reported year-
        in theinformative
        more     4Q20 compared  abouttothe  thereaction
                                                  same periodof thelastfirmyear?  ’. Note
                                                                             to the    shock.that Thewhile     turnover
                                                                                                          question         is more
                                                                                                                      specifically
        on-year turnover changes (Panel A) reveals that the bulk of firms declared a negative
        informative
        asked   about about
                         the totalthechange
                                        size ofinthe    shock the used,
                                                     employment         firm received,     the change
                                                                               that is, including       the in    employment
                                                                                                              extensive     marginis
        impact of COVID-19 (63%), while 24% report no change. In contrast, Panel B shows
        more informative
        adjustment      (hiringabout      the reaction
                                  or firing),                 of the firm
                                                 and the intensive           to the
                                                                          margin       shock. The
                                                                                    adjustment            question
                                                                                                     (workers      on specifically
                                                                                                                       temporary
        that only 38% of respondents report having decreased their employment, and 54% report
        asked through
        leave   about the     total change
                           furlough     schemes  in employment
                                                     - ERTEs). There    used, were
                                                                               that ten
                                                                                      is, including     the extensive
                                                                                           possible answers                 margin
                                                                                                                     expressed   in
        no change.6 These patterns suggest that firms have been able to absorb part of the shock,
        adjustmentdepending
        intervals,      (hiring or on firing),
                                           the and     the intensive
                                                 percentage        changemargin     adjustment (workers
                                                                             decrease/increase.                    on temporary
                                                                                                          The distribution       of
        since their employment decreased     Figure less       than their sales.
                                                        1: Distribution        of responses
        leave through
        responses          furlough
                     is shown      in Figure Figure
                                         schemes        1: first
                                                        A    Distribution
                                                   1.- ERTEs).        There
                                                                    look       of responses
                                                                           at were
                                                                              the     ten possibleofanswers
                                                                                    distribution                     expressed
                                                                                                            the reported         in
                                                                                                                              year-
               To analyze the type of           firms
                                             Figure
                                             Figure     most
                                                        1:      impacted
                                                             Distribution
                                                        1: reveals
                                                             Distribution    byof the   COVID-19
                                                                                   responses
                                                                               of responses             shock,     we  investigate
        intervals,
        on-year      depending
                   turnover          on the
                                changes           percentage
                                             (Panel
                                             Figure     A)         change
                                                        1: Distribution        Panel
                                                                               the      B: Change
                                                                         thatdecrease/increase.
                                                                                     bulk
                                                                               of temporary
                                                                                   responsesof firmsin  indeclared
                                                                                                          Theemployment
                                                                                                                  distribution
                                                                                                                       a negativeof
        which firmPanel    A: Change
                       characteristics     in  sales
                                            (productivity,       age, share Panel
                                                                               of       B: Change workers,   employment
                                                                                                                intangible assets
        responses
        impact    Panel
                  of is    A:
                      COVID-19 Change
                          shown in (63%),  in  sales
                                        Figure while
                                                   1. A 24% first report       Panel
                                                                    look atnothe
                                                                               Panel    B:  Change
                                                                                    distribution
                                                                                change. B:             ofin
                                                                                             In contrast,
                                                                                            Change           employment
                                                                                                            the   reported
                                                                                                                 Panel
                                                                                                        inactivity
                                                                                                             employment       year-
                                                                                                                          B shows
                  Panel
                  Panel A:
        share, indebtedness,   Change
                           A: Change cashin    sales
                                           inratio
                                               salesand size) correlatePanel      withB: the   fall inin
                                                                                            Change                    at the firm
                                                                                                             employment
        on-year
        that  onlyPanel
                     38%A:
                   turnover of Change
                                changesin(Panel
                               respondents     sales
                                                  reportA)having
                                                             revealsdecreased
                                                                         that the their
                                                                                     bulk employment,
                                                                                            of firms declared          a negative
                                                                                                                 and 54%     report
        level. In particular, our baseline specification consists of a regression of either turnover or
                      6
        impact
        no change.of COVID-19
                         These patterns(63%),     while that
                                              suggest      24% firms
                                                                   report   no been
                                                                          have   change.able In    contrast,
                                                                                              to absorb       partPanel
                                                                                                                    of theB shock,
                                                                                                                             shows
        employment growth of firm i (yi ) on a vector of firm characteristics (Xi ) as well as different
        that only
        since  their38%     of respondents
                       employment        decreasedreportlesshaving     decreased
                                                               than their    sales.their employment, and 54% report
        configurations of sector s (NACE rev 2-digit) and region j (Autonomous Communities)
                      6
        no change.
               To analyzeThese thepatterns
                                    type of suggest
                                                firms mostthatimpacted
                                                                  firms have bybeen     able to absorb
                                                                                  the COVID-19          shock,partweofinvestigate
                                                                                                                        the shock,
        fixed effects (γs,j ):
        since their
        which          employment decreased
                firm characteristics                    less than
                                            (productivity,      age,their
                                                                       sharesales.
                                                                              of temporary workers, intangible assets
            5
              Note that the number of observations differs depending on which explanatory variable we look at. We
        share, ToTable
                    analyze
        show in indebtedness,
                               the type
                                     cashBofratio
                         8 on Appendix
                                                firmsand
                                              that the
                                                        most    impacted
                                                            size)
                                                         results
                                                                             by with
                                                                     correlate
                                                                   are
                                                                                  thesimilar
                                                                       qualitatively
                                                                                        COVID-19
                                                                                         the fall
                                                                                               if we in
                                                                                                        shock,
                                                                                                      keepactivity we investigate
                                                                                                             only theat   the firm
                                                                                                                       observations
        which
        level.  firm
               In
        for which  we characteristics
                   particular,    our
                       have all the        (productivity,
                                         baseline
                                     regresors                  age, share
                                                      specification
                                                  of interest  (2,715       of temporary
                                                                      consists             workers,
                                                                                of a regression
                                                                      observations).                   intangible
                                                                                                  of either        assets
                                                                                                             turnover   or
            6
              This ‘inaction range’ masks a vast heterogeneity between sectors: while only 16.5% of firms in
        share,   indebtedness,
        employment
        hospitality     growth
                     services     ofcash
                              claim       no ratio
                                      afirm     (yi ) and
                                              ichange on    size)
                                                       in atheir
                                                            vector correlate  with   the fall
                                                                    of firm characteristics
                                                                 employment   with respect    in
                                                                                               theiactivity
                                                                                           to (X     as well at
                                                                                                   )previous as the82%
                                                                                                                     firm
                                                                                                                different
                                                                                                             year,      of
        level.
        the firmsIn inparticular,
        configurations  the real      oursector
                              of sector
                                    state baseline
                                                have specification
                                           s (NACE     rev able
                                                      been  2-digit)consists  of employment.
                                                                      and their
                                                                to sustain region a regression of either
                                                                                    j (Autonomous
                                                                                              Also,      turnover
                                                                                                      Communities)
                                                                                                    around         or
                                                                                                           10% of the
        respondents
        Source:  EBAEof    the survey have 0 employees and most of them claim not having changed their employment.
                         survey
        employment
        fixed
        Source: effects    growth
                           (γ
                 EBAE survey  s,j ): of firm i (yi ) on a vector of firm characteristics (Xi ) as well as different
        Notes: Panel A shows the reported year-on-year change in turnover. Panel B shows the reported year-on-year change in
        Source:  EBAE
                 EBAEA survey
        configurations
        Source:
        Notes:
            5 Panel
              Note
        employment,
        Source:     that
                 EBAE     theof
                        survey
                         shows
                      taking
                                  sector
                                the
                               number
                             into
                        survey          ofs
                                    reported
                                   account
                                              (NACEand
                                             year-on-year
                                           observations
                                           hires/layoffs
                                                          rev  2-digit)
                                                           change
                                                           differs
                                                             workers
                                                                            andPanel
                                                                   in turnover.   region
                                                                      in9a furlough
                                                                    depending    on which
                                                                                    scheme
                                                                                            jexplanatory
                                                                                       B shows (Autonomous
                                                                                             (ERTE)
                                                                                                                  Communities)
                                                                                                the reported year-on-year
                                                                                                           variable
                                                                                                                          change in
                                                                                                                    we look at. inWe
        Notes: Panel
        Notes:  Panel taking
        employment,   A shows
                      A  shows  theaccount
                                the
                             into   reported
                                    reported year-on-year
                                             year-on-year
                                           hires/layoffs   change
                                                           change
                                                         and       in
                                                                   in turnover.
                                                             workers  turnover.
                                                                      in a       Panel
                                                                                 Panel
                                                                           furlough    B
                                                                                       B shows
                                                                                    schemeshows the
                                                                                                the reported
                                                                                             (ERTE) reported year-on-year
                                                                                                             year-on-year change
                                                                                                                          change in
        fixed Panel
        show
        Notes:  effects
               in Table   (γs,jthe
                          8 on
                      A shows   ): reportedhires/layoffs
                                Appendix    B  that  the  results  are  qualitatively   similar  if we keep  only  the observations
                                             year-on-year change in turnover. Panel B shows the reported year-on-year change in
        employment,
        for which wetaking
        employment,     haveinto
                      taking   all account
                             into  account hires/layoffs
                                   the regresors         and
                                                         and workers
                                                             workers
                                                   of interest  (2,715in
                                                                      in a furlough
                                                                           furlough scheme
                                                                                    scheme (ERTE)
                                                                         aobservations).     (ERTE)
        employment,
            6
            5         taking into account hires/layoffs and workers in a furlough scheme (ERTE)
                  This  ‘inaction
                  Note that           range’ of
                               the number          masks  a vast heterogeneity
                                                     observations    differs depending between
                                                                                           on whichsectors:   while only
                                                                                                       explanatory         16.5%
                                                                                                                     variable      of firms
                                                                                                                              we look         in
                                                                                                                                         at. We
          hospitality
           show in Table  services    claim a noB change
                              8 on Appendix             that theinresults
                                                                     their are
                                                                            employment        withsimilar
                                                                                  qualitatively      respect  to the
                                                                                                           if we  keepprevious
                                                                                                                       only theyear,    82% of
                                                                                                                                  observations
          the   firms in
           for which   wethehave real
                                    allstate      sector have
                                         the regresors     of y been
                                                               interest able to sustain
                                                                          (2,715            their employment. Also, around 10% of (1)
                                                                                   observations).
                                                                 i = α + β  Xi + γs,j + i
                                                                                                                                             the
                6
          respondents      of the survey
                  This ‘inaction      range’have   masks      yi =heterogeneity
                                                      0 employees
                                                          a vast       α +most
                                                                      and    β  Xofi + γs,jclaim
                                                                                      them
                                                                                       between+ sectors:
                                                                                                   i not having  changed
                                                                                                              while  only their     of firms(1)
                                                                                                                           16.5%employment.   in
           hospitality    services    claim       a no change yyiiin=
                                                                    =  α
                                                                       α
                                                                     their+
                                                                          +  β
                                                                             β  Xi + γs,j + i
                                                                                 X
                                                                            employment+ γ     +  
                                                                                              with   respect  to the  previous   year,   82% (1)
                                                                                                                                             (1)
                                                                                                                                              of
                   Table 2 shows the estimation                ybeen  results.     The
                                                                                   i
                                                                          + βto Xsustain
                                                                 i =results.
                                                                       αable              first
                                                                                          s,j
                                                                                   i + γs,j   + four
                                                                                                   i     columns use sales growth (1)
                                                                                                   iemployment.
                                                                                                                                              as
           the
BANCO DE ESPAÑA
                   Table
                firms  in    2
                           the   shows
                                 real  state   the
                 14 DOCUMENTO DE TRABAJO N.º 2120    estimation
                                                  sector have                      The
                                                                                 9ofThe   first
                                                                                            theirfour    columns     use
                                                                                                                    Also, sales
                                                                                                                          around   growth
                                                                                                                                    10%   of  as
                                                                                                                                             the
           dependent
                   Tableofvariable,
                   Table
           respondents       22the
                                 shows
                                    surveythe
                                 shows         whereas
                                               the         the last
                                                haveestimation
                                                      0 employees
                                                     estimation       andfour
                                                                           mostcolumns
                                                                      results.
                                                                      results.     Thethemfirstusefour
                                                                                             claim
                                                                                          first  four employment
                                                                                                     not columns
                                                                                                         having
                                                                                                         columns       growth.
                                                                                                                     use
                                                                                                                 changed
                                                                                                                     use  sales     The four
                                                                                                                                   growth
                                                                                                                           their employment.
                                                                                                                          sales    growth     as
                                                                                                                                              as
        dependent
              Table variable,  whereas
                     2 shows the        the last
                                   estimation    four columns
                                               results.   The firstusefour
                                                                         employment   growth.
                                                                            columns use         The four
                                                                                         sales growth as
        columns
        dependent
        dependentforvariable,
                      each dependent
                    variable,  whereas
                               whereas variable
                                        the
                                        the last
                                            lastdiffer
                                                 four
                                                 four  in  the FEuse
                                                        columns
                                                        columns     configuration
                                                                  use    employment
                                                                         employment considered.
                                                                                      growth.
                                                                                      growth.   Our four
                                                                                                The
                                                                                                The pre-
                                                                                                    four
        columns  for  each dependent   variable differ in
        dependent variable, whereas the last four columns  the FE
                                                        9 full FE   configuration   considered. Our
                                                                  use employment growth. The four   pre-
        ferred
        columns
        columnsspecifications
                 for
                 for each     is the one
                      each dependent
                           dependent     that includes
                                       variable
                                       variable differ ina the
                                                differ in      set of
                                                           the FE       sector-region
                                                                    configuration
                                                                    configuration     dummies, Our
                                                                                    considered.
                                                                                    considered. and thus
                                                                                                Our pre-
                                                                                                    pre-
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