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Its time to self promote our US work on COVID19 & PPP that was recently published in the @jpube. Our team at http://covid19sbs.org lead by @john_eric, @GUlyssea and myself + 11 RAs have been on this since March!
Bottom line: PPP screwed over the smallest businesses
Bottom line: PPP screwed over the smallest businesses
In March @john_eric+ @GUlyssea and myself began surveying small biz in the US, just as the Paycheck Protection Program began. Every day we surveyed ~200 smallbiz on FB about their situation and beliefs. We recently published our work in the @jpube https://www.sciencedirect.com/science/article/pii/S0047272720301080#f0010
Our project in the USA studies the *crappy* rollout of the #PaycheckProtectionProgram. We present evidence that broadly defined information frictions and the program's "first-come, first-served" design disadvantaged the smallest businesses and potentially had permanent effects.
We put out an early WP in April showing initial effects + the evolution of expectations of smallbiz. All bad news: the billions seemed to not make a dent in the downward spiral of expectations in our surveys. Running out of funds in PPP1 did not help!
https://bit.ly/2ZVdDpS
https://bit.ly/2ZVdDpS
Early on, it seemed PPP was too little, too late: layoffs already common in this sample. Most had already laid off employees before the program even started (PPP was conditional on not laying off employees)
Overall PPP seemed to not change small biz owners outlook: beliefs about the future deteriorated throughout the month of April in spite of the huge amount of resources thrown at the PPP program. #fail
The Economist featured the results in April showing how in spite of the huge amount of resources provided, expectations just deteriorated throughout the period of April and May. https://www.economist.com/finance-and-economics/2020/05/02/politicians-in-america-and-europe-scramble-to-help-small-firms
Let me emphasize that reading and interacting with small biz owners made our team realize how hard they were being hit. This was a devastating blow to many we talked to. We have many of these testimonies posted on the project website https://covid19sbs.org/sb-voices-usa but I leave some here:
Taking the text from the responses regarding how they have been affected, the word cloud illustration below shows the most common words used in describing the situation is shown below (artistic shuffling extra)
What do small biz want out of the government? These answers showed a lot of gaps between what was offered, what was needed, and what was understood about what was already there. Again have many of these testimonies posted on the project website https://covid19sbs.org/sb-voices-usa
Taking the text from the responses regarding *how the government can help*, the word cloud illustration below shows the most common words used in describing the situation is shown below (artistic shuffling extra)
The testimony of thousands of small business owners seemed to suggest the details of PPP were not well understood. What constitutes a forgivable part of the loan? What if I already laid people off? For sure forgivable? What if I make a mistake? I applied and have not heard back?
The smallest business owners had a lower and lagged awareness/understanding of the PPP program. This skewed aid away from the smallest firms who lagged behind larger small businesses in terms of awareness. PPP1 drying out and some banks not doing their job did not help either.
But "How can you say they were not aware of the program, everyone was aware?"
We ask whether they are *aware* of a program "that can help their business". This includes their perception of what the program is, not just if they heard of it. This increases and then decreases!!
We ask whether they are *aware* of a program "that can help their business". This includes their perception of what the program is, not just if they heard of it. This increases and then decreases!!
This had REAL impacts for the smallest firms in our sample. Smaller businesses were less likely to apply to the PPP, and they were less likely to report having their application approved. See paper here https://bit.ly/33RHBwn
We have a lot of limitations given our sampling method via social media. However, given our data, we think these results matter because in our data, getting a PPP loan was associated with having more employees months later and lower expected probabilities of closure or bankruptcy
Informed opinion: US spent billions in PPP but fumbled the rollout and design. The program's "first-come, first-served" design disadvantaged the smallest businesses and potentially had permanent effects. We need to do better next round of aid. We need better economic leadership.
Important to add - vital work is being done by many researchers such as @AlexBartik @stroebel_econ. This is a crucial time and we need evidence and debate. Please do more COVID research, create more evidence. See other work and add here: https://docs.google.com/spreadsheets/d/1lg0_HHH9JgEoCry6qyGYyRiL1f4eLhr528U-N9y5FX4/edit?usp=sharing
This project was a lifeline for me. The team made this whole COVID quarantine bearable. We pivoted from other projects to this and we surveyed 40,000+ small biz and did an RCT in 8 countries in April -crazy teamwork! Shoutout to @ConsiliumBots for the help with the chatbots!
