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Information Frictions and Access to the Paycheck Protection Program

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

Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: The Paycheck Protection Program (PPP) extended over 650 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 â€œï¬ rst-come, ï¬ rst-served†design of the PPP program skewed its resources towards larger ï¬ rms and may have permanently reduced it’s 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 likely mattered, as businesses that received aid re-port 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: I15 I18 (search for similar items in EconPapers)
Date: 2020-05
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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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