Mark Gertler Summarizes Sectoral Differences in the Pandemic Recession
The COVID-19 pandemic affected businesses in different industries in disparate ways. Those in customer contact sectors, such as restaurants, hotels, gyms, and many other service fields, experienced sharp and sustained customer losses. Many were shut down. Businesses in sectors with low customer contact, such as manufacturing, experienced more modest declines and in some cases saw revenue growth. Within the high-contact sector, there was also heterogeneity: some firms developed contact-light ways to deliver their product. Restaurants that shifted to home delivery are a good example. A new study by Fernando Cirelli of New York University (NYU) and NBER affiliate Mark Gertler, also of NYU, provides new evidence on cross-sectoral and intra-sectoral disparities in firm experiences (29713). It then develops and calibrates a dynamic model with three types of firms: contact sector firms that cannot adapt, contact sector firms that can adapt, and non-contact sector firms. This model captures the sectoral dynamics of the economic decline in 2020, as well as the output recovery and inflation of 2021. Gertler summarizes the research findings in the video above. An archive of NBER videos on pandemic-related research is available.