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The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform

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  • Jean-Noel Barrot

    (Massachusetts Institute of Technology)

  • Ramana Nanda

    (Harvard Business School, Entrepreneurial Management Unit)

Abstract

We study the impact of Quickpay, a federal reform that indefinitely accelerated payments to small business contractors of the U.S. government. We find a strong direct effect of the reform on employment growth at the firm-level. Importantly, how-ever, we also document substantial crowding out of non-treated firms' employment within local labor markets. While the overall net employment effect was positive, it was close to zero in tight labor markets - where crowding out was stronger. Our results highlight an important channel for alleviating financing constraints in small firms, but also emphasize the general-equilibrium effects of large-scale interventions, which can lead to lower aggregate outcomes depending on labor market conditions.

Suggested Citation

  • Jean-Noel Barrot & Ramana Nanda, 2016. "The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform," Harvard Business School Working Papers 17-004, Harvard Business School, revised Jul 2018.
    • Handle: RePEc:hbs:wpaper:17-004
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