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Firm-level Expectations and Behavior in Response to Covid-19

  • Funded by IZA - Institute of Labor Economics
  • Total publications:0 publications

Grant number: unknown

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Key facts

  • Disease

    COVID-19

  • Start & end year

    N/A

  • Funder

    IZA - Institute of Labor Economics

  • Principal Investigator

    Unspecified Sebastian Link

  • Research Location

    Germany

  • Lead Research Institution

    ifo Institute & LMU Munich

  • Research Priority Alignment

    N/A

  • Research Category

    Secondary impacts of disease, response & control measures

  • Research Subcategory

    Economic impacts

  • Special Interest Tags

    N/A

  • Study Type

    Non-Clinical

  • Clinical Trial Details

    N/A

  • Broad Policy Alignment

    Pending

  • Age Group

    Unspecified

  • Vulnerable Population

    Unspecified

  • Occupations of Interest

    Unspecified

Abstract

How did sentiment about the policies for containing the COVID-19 pandemic affect firms' business outlook and behavior early in the crisis? In a representative panel of German firms, we demonstrate that the variation in expectations regarding the duration of COVID-19 induced lockdowns plausibly reflects sentiment that is unrelated to fundamentals. This sentiment-driven variation in expectations was an important determinant of firms' crisis response: Firms that perceived the shutdown to last longer were more likely to implement strong measures like layoffs or canceling investments. The implementation of soft measures, e.g., working from home, was unrelated to the expected crisis progression.