sample of 14,000 small businesses in 12 developing countries. McCaig and Pavcnik (2021) use multiple rounds of the Vietnamese nationally representative household surveys–conducted once every two years—to examine the entry and exit dynamics of family-owned firms over a long horizon. The tax-census data allow us to document exit and entry of household businesses at a monthly interval, better capturing business cycle fluctuations.

Second, our study is among the first to document the extent of (temporary) suspensions of household businesses in a developing country context. Earlier literature has documented a significant dormancy rate of registered enterprises in developing countries. For example, Sengupta and Singh (2019) show that about 20 percent of all registered Indian firms are dormant. High exit barriers associated with governments’ costly and uncertain legal procedures—such as those related to labor retrenchment and bankruptcy—are often the major reasons behind formal enterprises’ prolonged inactive status. Household businesses in Vietnam, however, are not subject to significant exit barriers; most owner-operated firms do not employ any contracted workers, and the business closure does not usually involve lengthy legal procedures.<sup>4</sup> Their motivation to suspend operation, therefore, could be considered more purely as a copying mechanism to disruptions in business activities, such as those caused by the COVID-19 pandemic lockdowns.

Third, our analysis contributes to the literature that examines the impacts of COVID-19 on small and/or informal businesses, especially during the onset of the pandemic in early 2020. Several studies have explored the initial COVID-19 effects on small businesses in developed economies such as the United States (Fairlie, 2020; Crane et al., 2021), Canada (Beland et al., 2020), and Western European countries Kraus et al. (2020). In a developingcountry setting, Shafi et al. (2020) investigate the pandemic effects on micro, small, and medium-sized enterprises in Pakistan and find that most firms were severely affected and faced with financial and supply chain disruptions, and decrease in demand. Several other studies have found adverse effects of COVID-19 on self-employment outcomes (for instance, (Dhingra and Machin, 2020) for India, (Mahmud and Riley, 2021) for Uganda, (Dang and Nguyen, 2020) for Vietnam, and (Mathew et al., 2020) for Zambia). Our paper adds to these studies and, to the best of our knowledge, is the first to document the effects of COVID-19 on household business suspension and exit in a developing country.<sup>5</sup> Lastly, this paper contributes to a strand of literature that studies the cyclical behavior of self-employment. Previous work has found that self-employment expands during downturns, led by an increase in transitions from unemployment to self-employment during recessions (Bosch and Maloney, 2008; Loayza and Rigolini, 2011; Shapiro, 2014, 2018). The nature of the COVID-19 recession, which was accompanied by reductions in demand and restrictions in mobility, have affected the self-employed disproportionally. Nevertheless, we find that household businesses

> 4According to Decree 78/2015/ND-CP, a Vietnamese household business wanting to dissolve its business needs to submit (i) an Announcement of Business Closure Letter and a (ii) Certification of Non-tax Obligations Letter (obtained from the local Tax Department), to the District’s People Committee where the firm is operating.

> 5Crane et al. (2021) show the business exit of firms during COVID-19 in the United States.

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