affects productivity by inducing adjustments in the use and price of factors of production, through changes in the demand structure and by altering the allocation of resources between high and low productivity firms. For example, Bloom et al. (2020a) estimate a reduction in productivity in the United Kingdom, primarily due to an increase in the cost of intermediate inputs in the short-run associated with measure to contain COVID-19 and lower R&D investment and managerial time in the medium-run, although they also document a partially offsetting positive shock of reallocation of resources from low to high productivity firms. Andrews et al. (2021) find a positive reallocation effect for three OECD countries, mainly driven by technology readiness to face the shock and the additional investments in technology. Statistical agencies, at least in developed countries such as the United States are already witnessing a decline in productivity. Multifactor productivity decreased in the United States by 1.7% (U.S. Bureau of Labor Statistics, 2021).

On the flip side, ex-ante firm exits may be contingent on initial firm productivity, as noted in Borino et al. (2021) who use survey data from 31 countries, including a few in Africa. More productive firms may be more prepared to offset the shock and are more agile in adjusting (for e.g., adjustments in operations model, work from home, innovation in products and so on) to minimize the negative impact of the lockdown restrictions, physical distancing norms or the disruptions in supply-chains.

One channel, as suggested in Andrews et al. (2021) is the fact that initial productivity may reflect technological and management capabilities that allow a faster and more effective firm response. Combining information on technology sophistication pre-COVID-19 and the BPS data for firms from Brazil, Senegal, and Vietnam, Cirera et al. (2021a) show that firms using more sophisticated technologies before the pandemic were more likely to increase the use of digital technologies in response to COVID-19 and achieved better sales performance, compared to firms that were similar in many other dimensions. Using a sample of more than 3,000 firms in 16 countries, including several developing countries, Grover and Karlus (2021) show that firms with structured management practices, which is highly correlated with productivity, show greater resilience in operational status and sales changes, plus they are also quicker to respond by adjusting their operating models.

The likelihood of exiting during the pandemic has also been correlated with burdensome business environment and lack of digital presence (Borino et al., 2021). Nonetheless, government support is pivotal. Using firm-level data for 17 countries, Gourinchas et al. (2020) suggest that in the absence of government support, the failure rate of small and medium enterprises (SMEs) would have increased by 9.1 percentage points. Likewise, evidence from Denmark also suggests that targeted policy support helped firms stay afloat and created incentives for job retention (Bennedsen et al., 2020). Although public support has played an pivotal role on avoiding business closures in high-income countries, prior work using the first round of BPS data shows that firms from middle- and lowincome countries are significantly less likely to receive public support (Cirera et al., 2021c). Some middle income economies, such as China, have nevertheless, witnessed an increase in the share of businesses that have received support (e.g., through online loans, Kong et al., 2021).

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