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Author: Robert W. Fairlie
Publisher:
ISBN:
Category : COVID-19 Pandemic, 2020-
Languages : en
Pages :
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Book Description
Was the $278 billion reboot of the $800 billion Paycheck Protection Program (PPP) in early 2021 disbursed equitably to minority communities? This paper provides the first analysis of how PPP funds were disbursed to minority communities in the third and final round of the program, which was specifically targeted to underserved and disadvantaged communities. Using administrative microdata on the universe of PPP loans, we find a strong positive relationship between PPP flows, as measured by the number of loans per employer business or loan amounts per employee, and the minority share of the population or businesses in the third round. In contrast, the relationship was negative in the first round of 2020 and less positive in the second round of 2020. We find a stronger positive relationship between minority share and loan numbers or amounts to employer businesses for first draw loans than second draw loans in 2021 (capturing some persistence in inequities). The patterns are similar for loan numbers and amounts to nonemployer businesses but with a strong positive relationship with minority share for both first draw and second draw loans. The rebooted PPP that ran from January to May 2021 appears to have been disbursed to minority communities as intended.
Author: Robert W. Fairlie
Publisher:
ISBN:
Category : COVID-19 Pandemic, 2020-
Languages : en
Pages :
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Book Description
Was the $278 billion reboot of the $800 billion Paycheck Protection Program (PPP) in early 2021 disbursed equitably to minority communities? This paper provides the first analysis of how PPP funds were disbursed to minority communities in the third and final round of the program, which was specifically targeted to underserved and disadvantaged communities. Using administrative microdata on the universe of PPP loans, we find a strong positive relationship between PPP flows, as measured by the number of loans per employer business or loan amounts per employee, and the minority share of the population or businesses in the third round. In contrast, the relationship was negative in the first round of 2020 and less positive in the second round of 2020. We find a stronger positive relationship between minority share and loan numbers or amounts to employer businesses for first draw loans than second draw loans in 2021 (capturing some persistence in inequities). The patterns are similar for loan numbers and amounts to nonemployer businesses but with a strong positive relationship with minority share for both first draw and second draw loans. The rebooted PPP that ran from January to May 2021 appears to have been disbursed to minority communities as intended.
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Languages : en
Pages :
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Author: Susan C. Morse
Publisher:
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Category :
Languages : en
Pages : 0
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The Paycheck Protection Program, or PPP, was huge. Between April 2020 and May 2021, it provided almost $800 billion to more than 11 million businesses--about a third of all U.S. businesses with 500 employees or fewer. The PPP was also flawed. Treasury and the Small Business Administration faced incomplete statutory instructions and a challenging tradeoff between speed and accuracy in distributing PPP funds.These flaws make the PPP a realistic and valuable case study; the PPP reveals tools that can be applied to similar distributions of emergency funds. One tool is back-end adjustments, meaning that funds are first distributed and then later it is decided whether recipients may keep the money. Another tool is distribution in descending order of necessity, meaning that the first recipients to receive funds are applicants that most clearly meet the criteria of the program. A fund can follow distribution in descending order of necessity to disburse all of its funds. This approach is similar to a descending price auction for the sale of bonds or a stock of goods. Disbursing amounts in descending order of necessity also allows a fund to collect information needed to improve future distribution policy.
Author: João Granja
Publisher:
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Category :
Languages : en
Pages : 0
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This paper takes an early look at the Paycheck Protection Program (PPP), a large and novel small business support program that was part of the initial policy response to the COVID-19 pandemic. We use new data on the distribution of the first round of PPP loans and high-frequency micro-level employment data to consider two dimensions of program targeting. First, we do not find evidence that funds flowed to areas more adversely affected by the economic effects of the pandemic, as measured by declines in hours worked or business shutdowns. If anything, funds flowed to areas less hard hit. Second, we find significant heterogeneity across banks in terms of disbursing PPP funds, which does not only reflect differences in underlying loan demand. The top-4 banks alone account for 36% of total pre-policy small business loans, but disbursed less than 3% of all PPP loans in the first round. Areas that were significantly more exposed to low-PPP banks received much lower loan allocations. We do not find evidence that the PPP had a substantial effect on local economic outcomes--including declines in hours worked, business shutdowns, initial unemployment insurance claims, and small business revenues--during the first round of the program. Firms appear to use first round funds to build up savings and meet loan and other commitments, which points to possible medium-run impacts. As data become available, we will continue to study employment and establishment responses to the program and the impact of PPP support on the economic recovery. Measuring these responses is critical for evaluating the social insurance value of the PPP and similar policies.
Author: R. Glenn Hubbard
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Enacted March 27, 2020, the Paycheck Protection Program (PPP) was the most ambitious and creative fiscal policy response to the Pandemic Recession in the United States. PPP offers forgivable loans -- essentially grants -- to businesses with 500 or fewer employees that meet certain requirements. In this paper, we present evidence that PPP has substantially increased the employment, financial health, and survival of small businesses, using data from the Dun & Bradstreet Corporation. We use event studies and standard difference-in-difference models to estimate the effect of a small business applying for larger PPP loans and of a small business being eligible for PPP based on size. While our findings are informative, we believe it is too early to issue conclusive judgment on PPP's success. We offer lessons for the future from the PPP experience thus far.
Author:
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Category : COVID-19 Pandemic, 2020-
Languages : en
Pages : 0
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Author: David Autor
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Category :
Languages : en
Pages : 0
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Author: Deniz Igan
Publisher:
ISBN:
Category : COVID-19 Pandemic, 2020-
Languages : en
Pages : 23
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This paper examines the incidence of special interests in the allocation of loans through the Paycheck Protection Program (PPP). We find that lobbying at the firm and industry levels helps obtain larger PPP loans during the pandemic. We also observe that PPP lending is more responsive to lobbying in ideologically less conservative areas as well as in industries less affected by the pandemic. Our findings are consistent with the notion that lobbying firms have experience in navigating administrative and policy complexity and can thus benefit more from aid provided under the PPP.
Author: Christopher Neilson
Publisher:
ISBN:
Category :
Languages : en
Pages :
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The Paycheck Protection Program (PPP) extended 669 billion dollars of forgivable loans in an unprecedented effort to support small businesses affected by the COVID-19 crisis. This paper provides evidence that information frictions and the "first-come, first-served” design of the PPP program skewed its resources towards larger firms and may have permanently reduced its effectiveness. Using new daily survey data on small businesses in the U.S., we show that the smallest businesses were less aware of the PPP and less likely to apply. If they did apply, the smallest businesses applied later, faced longer processing times, and were less likely to have their application approved. These frictions may have mattered, as businesses that received aid report fewer layoffs, higher employment, and improved expectations about the future.
Author: Karen G. Mills
Publisher: Springer Nature
ISBN: 3031556127
Category : Banks and banking
Languages : en
Pages : 285
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Book Description
Small businesses are the backbone of the U.S. economy. They are the biggest job creators and offer a path to the American Dream. But for many, it is difficult to get the capital they need to operate and succeed. In Fintech, Small Business & the American Dream, former U.S. Small Business Administrator and Senior Fellow at Harvard Business School, Karen G. Mills, focuses on the needs of small businesses for capital and how technology will transform the small business lending market. This is a market that has been plagued by frictions: it is hard for a lender to figure out which small businesses are creditworthy, and borrowers often don't know how much money or what kind of loan they need. Every small business is different; one day the borrower is a dry cleaner and the next a parts supplier, making it difficult for lenders to understand each business's unique circumstances. Today, however, big data and artificial intelligence have the power to illuminate the opaque nature of a small business's finances and make it easier for them access capital to weather bumpy cash flows or to invest in growth opportunities. Beginning in the dark days following the 2008-9 recession and continuing through the crisis of the Covid-19 Pandemic, Mills charts how fintech has changed and will continue to change small business lending. In the new fintech landscape financial products are embedded in applications that small business owners use on daily basis, and data powered algorithms provide automated insights to determine which businesses are creditworthy. Digital challenger banks, big tech and traditional banks and credit card companies are deciding how they want to engage in the new lending ecosystem. Who will be the winners and losers? How should regulators respond? In this pivotal moment, Mills elucidates how financial innovation and wise regulation can restore a path to the American Dream by improving access to small business credit. An ambitious book grappling with the broad significance of small business to the economy, the historical role of credit markets, the dynamics of innovation cycles, and the policy implications for regulation, this second edition of Fintech, Small Business & the American Dream is relevant to bankers, regulators and fintech entrepreneurs and investors; in fact, to anyone who is interested in the future of small business in America.
