Information Frictions and Access to the Paycheck Protection Program

68 Pages Posted: 4 Aug 2020

See all articles by Christopher Neilson

Christopher Neilson

New York University (NYU) - Leonard N. Stern School of Business; Princeton University - Woodrow Wilson School of Public and International Affairs

John Eric Humphries

Yale University, Department of Economics

Gabriel Ulyssea

University of Oxford - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 2020

Abstract

The Paycheck Protection Program (PPP) extended 669 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 its 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 may have mattered, as businesses that received aid report fewer layoffs, higher employment, and improved expectations about the future.

Suggested Citation

Neilson, Christopher and Humphries, John Eric and Ulyssea, Gabriel, Information Frictions and Access to the Paycheck Protection Program (July 2020). NBER Working Paper No. w27624, Available at SSRN: https://ssrn.com/abstract=3665895

Christopher Neilson (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
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John Eric Humphries

Yale University, Department of Economics ( email )

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New Haven, CT 06520-8268
United States

HOME PAGE: http://www.johnerichumphries.com

Gabriel Ulyssea

University of Oxford - Department of Economics ( email )

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Oxford, OX1 3UQ
United Kingdom

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