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The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform
Author(s) -
BARROT JEANNOËL,
NANDA RAMANA
Publication year - 2020
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12955
Subject(s) - payment , crowding out , transfer payment , labour economics , government (linguistics) , economics , psychological intervention , business , scale (ratio) , monetary economics , market economy , finance , welfare , psychology , linguistics , philosophy , physics , quantum mechanics , psychiatry
We study the impact of Quickpay , a reform that permanently 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. However, we document substantial crowding out of nontreated firms' employment within local labor markets. While the overall net employment effect is positive, it is close to zero in tight labor markets. Our results highlight an important channel for alleviating financing constraints in small firms, but emphasize the general‐equilibrium effects of large‐scale interventions, which can lead to lower aggregate outcomes depending on labor market conditions.