Information Frictions and Access to the Paycheck Protection Program
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.
We would like to thank Princeton University's Industrial Relations Section and Yale University's Tobin Center for Economic Policy for financially supporting this work. We would also like to thank Mariel Bedoya, Michael Borger, Iliana Cabral, Franco Calle, Alvaro Carril, Alejadrina Correa, Richard De Thorpe, Deniz Dutz, Maria Elena Guerrero, Isabel Jacas, Katherine Kwok, Manuel Martinez, Cecilia Moreira, Naomi Shimberg, Ignacio Riveros, Eduardo Vargas and Yagmur Yuksel for helpful research assistance on this project. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Humphries, John Eric & Neilson, Christopher A. & Ulyssea, Gabriel, 2020. "Information frictions and access to the Paycheck Protection Program," Journal of Public Economics, Elsevier, vol. 190(C). citation courtesy of