US

Small Firms in the Crisis

Question A:

Current institutional arrangements mean that small firms will be able to renegotiate with creditors and landlords to avoid bankruptcy during the lockdown.

Responses weighted by each expert's confidence

Question B:

A program that allows small businesses to skip rent and utilities during the lockdown, but repay them slowly over time afterwards, would be a net benefit to the economy.

Responses weighted by each expert's confidence

Question A Participant Responses

Participant University Vote Confidence Bio/Vote History
Acemoglu
Daron Acemoglu
MIT
Uncertain
4
Bio/Vote History
Renegotiation is hard at the best of times. Casual evidence suggests it hasn't worked out well with banks in many cases so far.
Alesina
Alberto Alesina
Harvard
Uncertain
1
Bio/Vote History
Altonji
Joseph Altonji
Yale
Disagree
3
Bio/Vote History
It will be in the interest of many creditors to renegotiate, and some will. But I don't know how widespread this will be.
Auerbach
Alan Auerbach
Berkeley
Uncertain
5
Bio/Vote History
Autor
David Autor
MIT
Uncertain
5
Bio/Vote History
That's the intention! Remains to be seen how well it works...
Baicker
Katherine Baicker
University of Chicago
Uncertain
3
Bio/Vote History
Banerjee
Abhijit Banerjee
MIT
Uncertain
5
Bio/Vote History
Bertrand
Marianne Bertrand
Chicago
Disagree
8
Bio/Vote History
Brunnermeier
Markus Brunnermeier
Princeton
Disagree
7
Bio/Vote History
Chetty
Raj Chetty
Harvard Did Not Answer Bio/Vote History
Chevalier
Judith Chevalier
Yale
Disagree
3
Bio/Vote History
Cutler
David Cutler
Harvard
Uncertain
5
Bio/Vote History
Deaton
Angus Deaton
Princeton
Agree
4
Bio/Vote History
Duffie
Darrell Duffie
Stanford
Disagree
2
Bio/Vote History
Edlin
Aaron Edlin
Berkeley
Uncertain
7
Bio/Vote History
The question is the extent. Sure there will be plenty of renegotiation. But how efficient? And at what cost?
Eichengreen
Barry Eichengreen
Berkeley
Agree
5
Bio/Vote History
Some small firms anyway. Friends in the small-firm space tell me that they renegotiate contracts all the time (anecdotal economics I know).
Einav
Liran Einav
Stanford
Uncertain
1
Bio/Vote History
Fair
Ray Fair
Yale
Agree
1
Bio/Vote History
Finkelstein
Amy Finkelstein
MIT
Disagree
5
Bio/Vote History
Goldberg
Pinelopi Goldberg
Yale
No Opinion
Bio/Vote History
Goolsbee
Austan Goolsbee
Chicago
Uncertain
6
Bio/Vote History
Let’s hope.
Greenstone
Michael Greenstone
University of Chicago
Uncertain
2
Bio/Vote History
Hall
Robert Hall
Stanford
Uncertain
2
Bio/Vote History
Hart
Oliver Hart
Harvard
Agree
5
Bio/Vote History
I would say should rather than will. They should also be encouraged to do so.
Holmström
Bengt Holmström
MIT
Uncertain
3
Bio/Vote History
Hoxby
Caroline Hoxby
Stanford Did Not Answer Bio/Vote History
Hoynes
Hilary Hoynes
Berkeley
Uncertain
8
Bio/Vote History
Judd
Kenneth Judd
Stanford
Disagree
8
Bio/Vote History
Renegotiation is possible in theory but there is not enough time for the huge number of changes necessary to avoid inefficient bankruptcies.
Kaplan
Steven Kaplan
Chicago Booth
Uncertain
7
Bio/Vote History
Kashyap
Anil Kashyap
Chicago Booth
Disagree
9
Bio/Vote History
huge frictions, plus the b'rutpcy courts could be overwhelmed. Greenwood & Thesmar identify a real problem. Not sure about their solution
-see background information here
Klenow
Pete Klenow
Stanford
Disagree
1
Bio/Vote History
The holdout problem?
Levin
Jonathan Levin
Stanford
Uncertain
3
Bio/Vote History
Many may be able to do so, especially with a scarcity of alternative tenants, but this is uncharted territory.
Maskin
Eric Maskin
Harvard
Uncertain
4
Bio/Vote History
Small firms may try to re-negotiate their way out of bankruptcy, but it's not clear how successful this will be.
Nordhaus
William Nordhaus
Yale
Disagree
2
Bio/Vote History
Obstfeld
Maurice Obstfeld
Berkeley
Uncertain
5
Bio/Vote History
Saez
Emmanuel Saez
Berkeley
Disagree
6
Bio/Vote History
Samuelson
Larry Samuelson
Yale
Uncertain
1
Bio/Vote History
One hopes this will be the case, but the result is yet to be seen.
Scheinkman
José Scheinkman
Columbia University
Disagree
7
Bio/Vote History
Schmalensee
Richard Schmalensee
MIT
Disagree
5
Bio/Vote History
Landlords and suppliers to small firms are often small firms themselves; not all have regular banking relationships.
Shapiro
Carl Shapiro
Berkeley
Disagree
7
Bio/Vote History
Shimer
Robert Shimer
University of Chicago
Uncertain
5
Bio/Vote History
Anecdotally, some firms have been able to renegotiate. It is unclear how many will be able to
Stock
James Stock
Harvard
Disagree
4
Bio/Vote History
Thaler
Richard Thaler
Chicago Booth
Disagree
6
Bio/Vote History
The default options are all bad for those with liquidity constraints. Cutting some slack is both humane and ma well be long-run maximizing.
Udry
Christopher Udry
Northwestern
Strongly Disagree
5
Bio/Vote History
There is substantial uncertainty about how lenders and landlords will deal with obligations of small businesses.

Question B Participant Responses

Participant University Vote Confidence Bio/Vote History
Acemoglu
Daron Acemoglu
MIT
Agree
4
Bio/Vote History
Caveat: perhaps some allowance when landlord is a small business or an individual.
Alesina
Alberto Alesina
Harvard
Agree
8
Bio/Vote History
Altonji
Joseph Altonji
Yale
Uncertain
2
Bio/Vote History
Auerbach
Alan Auerbach
Berkeley
Uncertain
5
Bio/Vote History
Autor
David Autor
MIT
Agree
5
Bio/Vote History
Simply allowing non-payment would do damage. Requiring immediate payment would do damage. This is a half-way house.
Baicker
Katherine Baicker
University of Chicago
Agree
3
Bio/Vote History
Banerjee
Abhijit Banerjee
MIT
Agree
6
Bio/Vote History
Bertrand
Marianne Bertrand
Chicago
Strongly Agree
10
Bio/Vote History
Brunnermeier
Markus Brunnermeier
Princeton
Strongly Disagree
7
Bio/Vote History
Chetty
Raj Chetty
Harvard Did Not Answer Bio/Vote History
Chevalier
Judith Chevalier
Yale
Uncertain
9
Bio/Vote History
I don't think it is obvious that, say, landlords are always better able to provide financing than tenants.
Cutler
David Cutler
Harvard
Strongly Agree
5
Bio/Vote History
Deaton
Angus Deaton
Princeton
Uncertain
4
Bio/Vote History
Duffie
Darrell Duffie
Stanford
Agree
2
Bio/Vote History
Edlin
Aaron Edlin
Berkeley
Uncertain
6
Bio/Vote History
Possibly. It is a mess. Should the rule be that rent is forgiven or accrues at 60 percent, or 80 percent, or 100 percent on the dollar?
Eichengreen
Barry Eichengreen
Berkeley
Agree
5
Bio/Vote History
Since moral hazard is not an issue. Consequences for landlords and utility companies would have to be addressed, of course.
Einav
Liran Einav
Stanford
Agree
1
Bio/Vote History
Fair
Ray Fair
Yale
Uncertain
5
Bio/Vote History
Finkelstein
Amy Finkelstein
MIT
Agree
2
Bio/Vote History
Goldberg
Pinelopi Goldberg
Yale
Agree
6
Bio/Vote History
Goolsbee
Austan Goolsbee
Chicago
Uncertain
5
Bio/Vote History
As long as we get control of the virus. If this thing lasts, extensions won’t work
Greenstone
Michael Greenstone
University of Chicago
Uncertain
2
Bio/Vote History
i don't understand whether the government is involved and might step in with this scenario. too many moving parts to judge
Hall
Robert Hall
Stanford
Uncertain
1
Bio/Vote History
We have so much trouble defining a small business that the benefits would be unfocused.
Hart
Oliver Hart
Harvard
Uncertain
5
Bio/Vote History
There is something to be said for such a program but some people rely on rent for their income, and it would be bad for them.
Holmström
Bengt Holmström
MIT
Agree
7
Bio/Vote History
Hoxby
Caroline Hoxby
Stanford Did Not Answer Bio/Vote History
Hoynes
Hilary Hoynes
Berkeley
Agree
5
Bio/Vote History
Judd
Kenneth Judd
Stanford
Agree
8
Bio/Vote History
US government pays ~0% interest. Many businesses are sound but need time to recover. Many fewer will fail with this policy.
Kaplan
Steven Kaplan
Chicago Booth
Uncertain
4
Bio/Vote History
Kashyap
Anil Kashyap
Chicago Booth
Uncertain
2
Bio/Vote History
depends how long the lockdown lasts, the people not getting paid matter too, and targeting will be hard. details on design really matter
Klenow
Pete Klenow
Stanford
Agree
2
Bio/Vote History
Levin
Jonathan Levin
Stanford
Uncertain
3
Bio/Vote History
Might be effective, but it is very hard to anticipate the full effects of this sort of policy.
Maskin
Eric Maskin
Harvard
Agree
6
Bio/Vote History
If these firms go under, the economy will be dealt a serious blow. Better to try to keep them going until the economy opens up
Nordhaus
William Nordhaus
Yale
Agree
2
Bio/Vote History
Obstfeld
Maurice Obstfeld
Berkeley
Uncertain
6
Bio/Vote History
Depends on position of those to whom they owe money, and if they have alternative resources.
Saez
Emmanuel Saez
Berkeley
Agree
4
Bio/Vote History
Samuelson
Larry Samuelson
Yale
Strongly Agree
8
Bio/Vote History
This would help keep firms, workers and productive capabilities intact, which will be important in the recovery.
Scheinkman
José Scheinkman
Columbia University
Disagree
8
Bio/Vote History
Small businesses need help but no reason to tax only utilities or landlords to finance this subsidy. Also payment chains are complex.
Schmalensee
Richard Schmalensee
MIT
Agree
5
Bio/Vote History
Utilities can generally wait; less clear that most landlords can.
Shapiro
Carl Shapiro
Berkeley
Agree
6
Bio/Vote History
Shimer
Robert Shimer
University of Chicago
Agree
5
Bio/Vote History
There is risk to the commercial mortgage market from this, but it already faces a difficult period
Stock
James Stock
Harvard
Agree
5
Bio/Vote History
Thaler
Richard Thaler
Chicago Booth
Strongly Agree
7
Bio/Vote History
Make flexibility the default.
Udry
Christopher Udry
Northwestern
Agree
6
Bio/Vote History
There will, however, be difficult issues in designing a program like this.