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    The Targeting and Impact of Paycheck Protection Program Loans to Small Businesses
    21 Sep 2020Working Paper Summaries

    The Targeting and Impact of Paycheck Protection Program Loans to Small Businesses

    by Alexander Bartik, Zoë B. Cullen, Edward L. Glaeser, Michael Luca, Christopher Stanton, and Adi Sunderam
    Survey data on business owners collected by the Alignable network shows that lending to bank customers in better financial positions may have been prioritized, possibly crowding out less connected firms that would have benefitted more from the loans.
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    Author Abstract

    The Paycheck Protection Program (PPP) aimed to quickly deliver hundreds of billions of dollars of loans to small businesses, with the loans administered via private banks. In this paper, we use firm-level data to document the demand and supply of PPP funds. Using an instrumental variables approach, we find that PPP loans led to a 14 to 30 percentage point increase in a business’s expected survival, and a positive but imprecise effect on employment. Moreover, the effects on survival were heterogeneous and highlight an important tradeoff faced by policymakers: while administering the loans via private banks allowed for rapid delivery of funds, it also limited the government’s ability to target the funding—instead allowing pre-existing connections between businesses and banks to determine which firms would benefit from the program.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: August 2020
    • HBS Working Paper Number: HBS Working Paper #21-021
    • Faculty Unit(s): Entrepreneurial Management; Finance; Negotiation, Organizations & Markets
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    Michael Luca
    Michael Luca
    Lee J. Styslinger III Associate Professor of Business Administration
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    Christopher T. Stanton
    Christopher T. Stanton
    Marvin Bower Associate Professor
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    Adi Sunderam
    Adi Sunderam
    Willard Prescott Smith Professor of Corporate Finance
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