Were small businesses more likely to permanently close in the pandemic?

Abstract Previous estimates indicate that COVID-19 led to a large drop in the number of operating businesses early pandemic, but surprisingly little is known on whether these shutdowns turned into permanent closures and small were disproportionately hit. This paper provides first analysis business using confidential administrative firm-level panel data covering universe filing sales taxes from California Department Tax Fee Administration. We find increases closure rates two quarters 2020, strong reversal this trend third quarter 2020. The increase pandemic was substantially larger for than businesses, rebound also larger. disproportionate closing sharp concentration market share among as indicated by Herfindahl–Hirschman Index with only partial after initial increase. findings highlight fragility during adverse shock consequences competitiveness markets.