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Information frictions and access to the Paycheck Protection Program

Humphries, JE; Neilson, CA; Ulyssea, G; (2020) Information frictions and access to the Paycheck Protection Program. Journal of Public Economics , 190 , Article 104244. 10.1016/j.jpubeco.2020.104244. Green open access

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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.

Type: Article
Title: Information frictions and access to the Paycheck Protection Program
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jpubeco.2020.104244
Publisher version: https://doi.org/10.1016/j.jpubeco.2020.104244
Language: English
Additional information: This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Keywords: Social Sciences, Economics, Business & Economics, COVID-19, Small business, Information frictions, CARES Act, TAKE-UP
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10131606
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