Title

Information Frictions and Access to the Paycheck Protection Program

Author(s)

Christopher Neilson Christopher Neilson (Princeton University )

John Eric Humphries John Humphries (Yale University)

Gabriel Ulyssea 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.

Creation Date

2020-05

Section URL ID

Paper Number

643

URL

https://dataspace.princeton.edu/bitstream/88435/dsp01p2676z45h/5/643.pdf

File Function

Jel

I15, I18

Keyword(s)

COVID-19, small business, information frictions, CARES Act

Suppress

false

Series

1