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Did the small business administration’s COVID-19 assistance go to the hard hit firms and bring the desired relief?

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  • Li, Meng

Abstract

The paper uses newly released Small Business Pulse Survey data on small business’ response to questions about overall COVID-19 impact, federal aid request, federal aid receipt, and subsequent changes in revenue and employee hours to evaluate the efficacy of three federal aid programs: Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL), and Small Business Administration (SBA) loan forgiveness programs. The paper finds no evidence that the severity of COVID-19 impact is related to the application and approval rate of any of the SBA assistance programs, implying that the relief funds did not reach the firms that need the liquidity injection the most. But the firms that did receive the relief funds were less likely to report revenue decrease and employee hours decline during the subsequent weeks. This result provides preliminary support to the social insurance value of the relief programs in boosting small businesses’ economic activities during the COVID-19 crisis.

Suggested Citation

  • Li, Meng, 2021. "Did the small business administration’s COVID-19 assistance go to the hard hit firms and bring the desired relief?," Journal of Economics and Business, Elsevier, vol. 115(C).
    • Handle: RePEc:eee:jebusi:v:115:y:2021:i:c:s0148619520304136
    DOI: 10.1016/j.jeconbus.2020.105969
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    References listed on IDEAS

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    1. John Eric Humphries & Christopher Neilson & Gabriel Ulyssea, 2020. "The evolving impacts of COVID-19 on small businesses since the CARES Act," Working Papers 2020-48, Princeton University. Economics Department..
    2. Granja, João & Makridis, Christos & Yannelis, Constantine & Zwick, Eric, 2022. "Did the paycheck protection program hit the target?," Journal of Financial Economics, Elsevier, vol. 145(3), pages 725-761.
    3. Alexander W. Bartik & Marianne Bertrand & Zoe Cullen & Edward L. Glaeser & Michael Luca & Christopher Stanton, 2020. "The impact of COVID-19 on small business outcomes and expectations," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 117(30), pages 17656-17666, July.
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    Cited by:

    1. Staples, Aaron J. & Krumel, Thomas P. Jr., 2022. "The Paycheck Protection Program & Small Business Performance: Evidence from Craft Breweries," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322484, Agricultural and Applied Economics Association.
    2. Aaron J. Staples & Thomas P. Krumel, 2023. "The Paycheck Protection Program and small business performance: Evidence from craft breweries," Small Business Economics, Springer, vol. 61(3), pages 931-956, October.

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    More about this item

    Keywords

    Paycheck Protection Program; Economic Injury Disaster Loan; SBA loan forgiveness; COVID;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H8 - Public Economics - - Miscellaneous Issues

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