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3. The Effects of Covid-19 on Firms in the MENA Region
Figure 3. How do firms adapt to the pandemic? Answers to the question ’Has your business adjusted its business model to reduce being directly in physical proximity with customers?’
Source: Author’s own compilation based on data from the CCMMENT.
Recall that the main purpose of this paper is to study the effects of the pandemic on firms in the MENA region. The survey design allows us to identify the effects of Covid-19 by comparing firm outcomes during the pandemic (waves 1 and 2) to the pre-pandemic period (Feb 2020). Since we have four countries in this study and we know the industries in which the firms operate, we use interactions to explore how the firm outcomes differ by country and industry, as well as firm size categories. To generate how the different firm outcomes behave in the pandemic versus the pre-pandemic periods, we estimate the following equation:
������������������������������������ =����0 +∑2 ����=1(�������� ��������������������)+∑2 ����=1����������������������������� ∗����(����|����|����)�+�������� +������������ (1)
In Equation 1, the dependent variable outcomeft is the firm outcome of firm f in wave t. On the right hand side, wave is an independent dummy variable which takes the value of one for the respective data wave (we have two waves). The same variable will also be interacted with firm size, country or industry indicators (the variable X) to capture the average differential effects of the pandemic in each wave on the different size categories (subscript s), the four countries (subscript c), and the separate industries (subscript i). We include a set of firm fixed effects because this allows us to control for nonobservable and time non-varying firm characteristics. Conveniently, this also allows us to remove the level coefficients of the indicators of the firm size categories, countries, and/or industries (since these
