Economics in a picture
Households owning businesses with lower income are more exposed to the pandemic crisis
In periods of contraction in economic activity, the reduction in wealth and income of households owning businesses is more significant in those that have a high financial dependency on the business. This dependency can be measured by combining information on the number of household members working in the business, the share of the business in the household’s assets and the household liability for business debts. According to the data from the Household Finance and Consumption Survey in the euro area, in 2017 the percentage of households owning businesses whose financial situation was highly dependent on the business stood at 33% in Portugal and at 40% in the remaining euro area countries. This percentage is higher for households with lower income and in particular for those below the 40th percentile of the income distribution.
The pandemic crisis affects sectors of activity differently. Households with businesses in the sectors most affected by the pandemic crisis during the lockdown period account for 56% of all households owning businesses in Portugal and 23% in the euro area. Combining information on the sector of activity and on the financial dependency, 18% of the Portuguese households owning businesses are very exposed to the pandemic crisis (10% in the rest of the euro area countries). Both in Portugal and in the euro area, this exposure is particularly high for lower income households.
For further details see Costa, Farinha, Martins and Mesquita (2020). "Business owners in Portugal and the euro area: characteristics and exposure to the pandemic", Banco de Portugal, Economic Studies, Vol. VI, No 4.
Prepared by Sónia Costa, Luísa Farinha, Luís Martins and Renata Mesquita. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of Banco de Portugal or the Eurosystem.