Temporary versus Permanent Exits during the Covid 19 Pandemic

Temporary versus Permanent Exits during the Covid 19 Pandemic | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Temporary versus Permanent Exits during the Covid 19 Pandemic Kanishka Kacker, Chetna Ahuja This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-4638805/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract During the COVID-19 pandemic, firms were eight times more likely to exit temporarily than permanently. Temporary exits were 50% less likely to involve firing permanent workers, implying smaller welfare losses. However, the literature on firm exits has paid little attention to distinguishing between temporary and permanent exits. By leveraging the pandemic as an unforeseen shock in a panel involving 11000 firms across 39 countries, we find increased reliance on supplier-specific inputs raises the probability of temporary, but not permanent, exit by 45%. We argue labour supply drops temporarily in response to the pandemic, lowering profit margins and forcing exit. Temporary exits avoid losses from supplier-specific inputs, which permanent exits or continued operation necessarily incur, emerging as a dominant strategy for firms reliant on such inputs. Consistent with this argument, further analysis reveals input shortages - not demand drops - and occupations prone to infection in the absence of vaccines to be primary drivers. JEL Codes: D22, D23, L60, L16 Input specificity Supply Shock Recession Firm exit Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-4638805","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":326862216,"identity":"d039c0de-a71a-49c6-b243-0b198412a17b","order_by":0,"name":"Kanishka Kacker","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAzElEQVRIiWNgGAWjYBACCR4GBsYGBgY5NiAlARJhI1aLMelaEhtAHKIcJtlz+OHHGRX30vv4DzfeYKixY+CTbsCvRZq3zVhyw5ni3DaJxGYLhmPJDGwyB/BrkeNnMGN82JYA1MLYJsHAdoCBTSKBkBb2b4wP/yWks/EfBGr5R4QWad4eM8aNDQkJbAyJIIuI0CLZc6ZYcsaxBEOwXxL7knkIapE4k77xY09Ngrx8//GHNz58s5OTn0FACyoAKuYhRf0oGAWjYBSMAhwAAI/KOnM6dzSMAAAAAElFTkSuQmCC","orcid":"","institution":"Indian Statistical Institute","correspondingAuthor":true,"prefix":"","firstName":"Kanishka","middleName":"","lastName":"Kacker","suffix":""},{"id":326862218,"identity":"32b1a260-2052-4052-ab04-678f0dd75c28","order_by":1,"name":"Chetna Ahuja","email":"","orcid":"","institution":"UBS India","correspondingAuthor":false,"prefix":"","firstName":"Chetna","middleName":"","lastName":"Ahuja","suffix":""}],"badges":[],"createdAt":"2024-06-25 22:15:05","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-4638805/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-4638805/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":63301663,"identity":"b5faf2bf-ff00-43da-8527-29eb2910113e","added_by":"auto","created_at":"2024-08-26 16:19:22","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":761804,"visible":true,"origin":"","legend":"","description":"","filename":"TemporaryversusPermanentExits.pdf","url":"https://assets-eu.researchsquare.com/files/rs-4638805/v1_covered_a23d0ff2-9a40-4367-b425-c6141ca6b146.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Temporary versus Permanent Exits during the Covid 19 Pandemic","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Input specificity, Supply Shock, Recession, Firm exit","lastPublishedDoi":"10.21203/rs.3.rs-4638805/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-4638805/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eDuring the COVID-19 pandemic, firms were eight times more likely to \u0026nbsp;exit temporarily than permanently. Temporary exits were 50% less likely to involve firing permanent workers, implying smaller welfare losses. However, the literature on firm exits has paid little attention to distinguishing between temporary and permanent exits. By leveraging the pandemic as an unforeseen shock in a panel involving 11000 firms across 39 countries, we find increased reliance on supplier-specific inputs raises the probability of temporary, but not permanent, exit by 45%. We argue labour supply drops temporarily in response to the pandemic, lowering profit margins and forcing exit. Temporary exits avoid losses from supplier-specific inputs, which permanent exits or continued operation necessarily incur, emerging as a dominant strategy for firms reliant on such inputs. 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