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

Author

Listed:
  • Brown, J. David

    (U.S. Census Bureau)

  • Denes, Matthew

    (Carnegie Mellon University)

  • Duchin, Ran

    (Boston College)

  • Hackney, John

    (University of South Carolina)

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.

Suggested Citation

  • Brown, J. David & Denes, Matthew & Duchin, Ran & Hackney, John, 2024. "How Big Is Small? The Economic Effects of Access to Small Business Subsidies," IZA Discussion Papers 17092, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17092
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    More about this item

    Keywords

    government subsidies; small firms; procurement;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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