Abstract
AbstractOur paper sheds light on the complexity of liquidity injection programs by showing unintended consequences that arise when firm heterogeneity is overlooked. Utilizing firm‐level data from the Paycheck Protection Program, we find government lending effectively reduced closures, particularly if received during the first two weeks. However, we find significant heterogeneity in the effectiveness of funds, resulting from broad‐brush eligibility guidelines and differences in how firms process information. The implementation relied on the banking system, which exacerbated the distributional effects by favoring firms with stronger customer capital. Our findings highlight the importance of thoughtful liquidity distribution design to maximize its benefits.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
