How Big is Small? The Economic Effects of Access to Small Business Government Support

Abstract

Industry size standards that determine eligibility for U.S. small business support 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, resource allocation, and industry outcomes using administrative data from the Census Bureau. Following size standard increases, revenues decline for an industry’s smallest firms. These effects stem from procurement contracts being reallocated from smaller to larger firms. Consequently, small firms are more likely to exit and industries become more concentrated. Our findings highlight the broad economic effects of changing eligibility for government small business support.