How Big Is Small? The Economic Effects of Access to Small Business Subsidies

J. David Brown, Matthew Denes (denesm@andrew.cmu.edu), Ran Duchin (duchinr@bc.edu) and John Hackney (john.hackney@moore.sc.edu)
Additional contact information
Matthew Denes: Carnegie Mellon University
Ran Duchin: Boston College
John Hackney: University of South Carolina

No 17092, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Industry size standards that determine eligibility for small business subsidies have vastly increased over the past decade. We exploit quasi-random variation in the implementation of size standard increases to study the effects on small firms, subsidy allocation, and industry outcomes using Census Bureau microdata. Following size standard increases, revenues decline for an industry's smallest firms, and they are less likely to survive. We link these effects to a reallocation of government procurement contracts from smaller to larger firms. Consequently, industries become more concentrated and growth declines. These findings highlight the broad economic effects of changing eligibility for small business subsidies.

Keywords: government subsidies; small firms; procurement (search for similar items in EconPapers)
JEL-codes: E24 G38 H25 H57 L25 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2024-06
New Economics Papers: this item is included in nep-ent and nep-sbm
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Working Paper: How Big is Small? The Economic Effects of Access to Small Business Subsidies (2024)
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