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

Alexander  Bartik; Zoë B. Cullen; Edward L. Glaeser; Michael  Luca; Christopher  Stanton; Adi   Sunderam

Working Paper | HBS Working Paper Series | 2020

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

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.

Keywords: Paycheck Protection Program; targeting; Impact; Entrepreneurship; Health Pandemics; Small Business; Financing and Loans; Outcome or Result; United States;

Language: English

Format: Print

77 pages

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Citation:

Bartik, Alexander, Zoë B. Cullen, Edward L. Glaeser, Michael Luca, Christopher Stanton, and Adi Sunderam. "The Targeting and Impact of Paycheck Protection Program Loans to Small Businesses." Harvard Business School Working Paper, No. 21-021, August 2020.

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

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