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Information Frictions and Access to the Paycheck Protection Program

Author

Listed:
  • Christopher Neilson

    (Princeton University)

  • John Eric Humphries

    (Yale University)

  • Gabriel Ulyssea

    (Oxford University)

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 "first-come, first-served" design of the PPP program skewed its resources towards larger firms 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.

Suggested Citation

  • Christopher Neilson & John Eric Humphries & Gabriel Ulyssea, 2020. "Information Frictions and Access to the Paycheck Protection Program," Working Papers 643, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:643
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    More about this item

    Keywords

    COVID-19; small business; information frictions; CARES Act;
    All these keywords.

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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