reclassified in industry) and 200 countries (Gaulier and Zignago, 2010). The information on whether firms export and GVC participation is obtained from the Enterprise Survey, while the information on bilateral trade flows varies across industries. Our results confirm the key standard finding of gravity equations, namely the evidence on the negative association between trade flows and geographic distance (Table 6). This negative association is stronger for MENA than peer countries in Eastern Europe and Central Asia (Pal et al., 2022). Our estimates also show that innovative firms and GVC participants (as opposed to exporters that do not import) tend to trade more than other firms.

# **IV. Firm performance during the COVID-19 crisis**

The COVID-19 crisis disrupted economic activity across the globe. The spread of the pandemic forced governments to impose strict containment measures, generating international supply and demand shocks across many countries. A growing literature has documented severe impacts of the COVID19 crisis on firms as disruptions in production and depressed demand resulted in revenue losses, business closures, mass layoffs and liquidity shortages (Adams-Prassl et al., 2020; Bartik et al., 2020; Humphries et al., 2020; Revoltella et al., 2020). While global value chains remained so far quite resilient, it is an open question whether COVID-19 will have a long-term impact on international trade, global value chains and their organization.

Numerous studies have also pointed to differences across enterprises, with smaller firms being especially hard-hit (Apedo-Amah et al., 2020; Bartik et al., 2020). Building on the large literature emphasizing the importance of management practices for firm performance (including during crises), recent work has in turn also documented that better managed firms experienced smaller drops in sales and were more likely to implement changes in the organization of labor, and in particular to use remote work more intensely (Schivardi et al., 2021; Cette et al., 2020; Giorcelli, 2019; Bartz-Zuccala et al., 2018; Bloom et al., 2016).

Evidence from past crises suggests that temporary support to firms can be effective and early evidence appears to confirm that government support schemes helped mitigate employment declines and business closures in the current crisis as well (Bruhn, 2020; De Mel et al., 2012). At the same time, concerns have been raised about the effectiveness of government support programs in reaching the firms most in need – support may have, for instance, disproportionately benefited larger firms (Humphries et al., 2020).

The COVID-19 crisis has had a particularly strong impact on MENA economies. Compared to the average of upper-middle-income countries, firms in MENA were less likely to receive government support than the average of upper-middle-income economies (Figure 10). They were also more likely to close, permanently or temporarily, and saw larger drops in sales (and employment) than firms in richer economies where the policy support was more widespread. They were less likely to start or increase delivery of goods or services or to start and increase remote work. At the same time, however, firms in MENA were as likely to start or increase business activity online than firms in other regions.

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