Does Size Matter? Evidence from Changes in Small Business Size Standards

Small business size standards increased considerably in the United States since 2002. Following their staggered introduction across industries, we find lower shares of small businesses in industry establishments and employment and declines in job creation and business formation. Consequently, growth rates of industry productivity declined, leading to an overall drop in GDP growth in areas reliant on small businesses. The effects operate through shifts in access to government procurement and small business loans and are nonexistent following proposed unimplemented changes. Overall, we offer new evidence on the role of government policy and small firms in business dynamism and economic growth