that the adjustment occurred almost entirely at the intensive margin, through a decline in trade volumes of globally engaged firms with their participation in global markets along with the numbers of destination or sourcing markets per firm remaining stable (see Behrens et al. (2013) for Belgium and Bricongne et al. (2012) for France). Our paper adds to the literature by providing evidence on trade adjustments at the intensive and extensive margins by firms initially and in the pandemic recovery phase based on both BPS data and customs data for large samples of firms in developing countries. While the COVID-19 pandemic is a unique crisis, the evidence that we provide can be useful in preparing policy makers for complex events that affect firms through combined demand, supply, and uncertainty shocks.

The effect of shocks on trade outcomes is, however, not uniform across firms, sectors, and countries. For instance, in face of the GFC smaller firms in France were more likely to exit the international market and experience a large decline in their number of export destinations (Bricongne et al., 2012). French firms importing inputs from China suffered shortages due to the COVID-19 pandemic that disrupted their production and translated into a stronger decline of their exports until June 2020 (Lafrogne-Roussier et al., 2021). Services trade was much more resilient to the GFC than goods trade, for several reasons: services trade demand is less cyclical, less dependent on external finance, and less subject to protectionist measures (Borchert and Mattoo, 2010; Ariu, 2016). However, in the current pandemic, trade of services sectors requiring physical proximity (travel, transport, and construction) experienced substantial declines, while trade of financial, telecommunications, computer and information services was resilient or even thrived (WTO, 2021; World Bank, 2021). Sector characteristics related to the inputs used in production (e.g., whether inputs are imported and in particular from China and the intensity of unskilled labor use) are shown to drive the negative effect of the COVID-19 shock on exports (Bas et al., 2022). Country characteristics pertaining to the severity of the domestic shock (see Almunia et al. (2021) for Spain) and the extent of credit constraints (see Paravisini et al. (2015) for Peru) also seem to have mattered for firms’ trade adjustments during the GFC. A novel contribution of our paper is that it uncovers the effect of the pandemic on GVC firms relative to other globally engaged firms.

A growing set of studies using trade data at the aggregate and product level emphasize the benefits of global connectedness and trade in promoting resilience during the COVID-19 crisis (Miroudot, 2020; Espitia et al., 2022). Emerging firm-level evidence from the current pandemic also suggests that exporters and firms in GVCs are more resilient than domestic firms (Hyun et al., 2020; Brucal et al., 2021). Hyun et al. (2020) examine the limited set of 7,832 publicly listed firms in 71 countries focusing on their stock market performance in response to the COVID-19 shock, while Brucal et al. (2021) use the first round of the BPS data for about 50 countries covering more than 100,000 firms but only emphasize the responses of firms in South Asia. The study closest to ours is Borino et al. (2021) who use cross-sectional data for a small sample of 4,433 firms in 133 countries to illustrate that globally engaged firms were more strongly affected by the early stages of the pandemic, experiencing more difficulties accessing inputs and logistic services (to manage supply chains) and selling outputs but have taken more resilient actions than domestically-oriented firms, such as working remotely, sourcing from new suppliers, developing new products, or temporarily loaning employees to other 6