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Information Frictions and Access to the Paycheck Protection Program

John Humphries, Christopher Neilson () and Gabriel Ulyssea
Additional contact information
Gabriel Ulyssea: Department of Economics, University of Oxford

No 2247, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The Paycheck Protection Program (PPP) extended 669 billion dollars of forgivable loans in an unprecedented effort to support small businesses affected by the COVID-19 crisis. This paper provides evidence that information frictions and the "first-come, first-served" design of the PPP program skewed its resources towards larger firms and may have permanently reduced its effectiveness. Using new daily survey data on small businesses in the U.S., we show that the smallest businesses were less aware of the PPP and less likely to apply. If they did apply, the smallest businesses applied later, faced longer processing times, and were less likely to have their application approved. These frictions may have mattered, as businesses that received aid report fewer layoffs, higher employment, and improved expectations about the future.

Keywords: COVID-19; Small business; Information frictions; CARES Act (search for similar items in EconPapers)
JEL-codes: H0 J01 J08 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2020-08
New Economics Papers: this item is included in nep-lab and nep-ore
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https://cowles.yale.edu/sites/default/files/files/pub/d22/d2247.pdf (application/pdf)

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Working Paper: Information Frictions and Access to the Paycheck Protection Program (2020) Downloads
Working Paper: Information Frictions and Access to the Paycheck Protection Program (2020) Downloads
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