The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform
We study the impact of Quickpay, a federal reform that indefinitely accelerated payments to small business contractors of the U.S. government. We find a strong direct effect of the reform on employment growth at the firm level. Importantly, however, we also document substantial crowding out of non-treated firms' employment within local labor markets. While the overall net employment effect was positive, it was close to zero in tight labor markets—where crowding out was stronger. Our results highlight an important channel for alleviating financing constraints in small firms but also emphasize the general-equilibrium effects of large-scale interventions, which can lead to lower aggregate outcomes depending on labor market conditions.
Keywords: Small Business; Employment; Business and Government Relations; Governing Rules, Regulations, and Reforms;
Citation:
Barrot, Jean-Noel, and Ramana Nanda. "The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform." Harvard Business School Working Paper, No. 17-004, July 2016. (Revised July 2018, forthcoming Journal of Finance.) View Details
