How Big is Small? The Economic Effects of Access to Small Business Subsidies
June 2024
Working Paper Number:
CES-24-28
Abstract
Industry size standards that determine eligibility for small business subsidies have vastly increased
over the past decade. We exploit quasi-random variation in the implementation of size standard
increases to study the effects on small firms, subsidy allocation, and industry outcomes using
Census Bureau microdata. Following size standard increases, revenues decline for an industry's
smallest firms, and they are less likely to survive. We link these effects to a reallocation of
government procurement contracts from smaller to larger firms. Consequently, industries become
more concentrated and growth declines. These findings highlight the broad economic effects of
changing eligibility for small business subsidies.
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:
market,
macroeconomic,
growth,
firms size,
small firms,
expenditure,
revenue,
subsidy,
contract
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Internal Revenue Service,
Small Business Administration,
County Business Patterns,
Census Bureau Longitudinal Business Database,
Longitudinal Business Database,
Boston College,
Journal of Economic Literature,
Economic Census,
North American Industry Classification System,
Carnegie Mellon University
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