Working Paper: NBER ID: w20543
Authors: Andrew T. Young; Matthew J. Higgins; Donald J. Lacombe; Briana Sell
Abstract: Conventional wisdom suggests that small businesses are innovative engines of Schumpetarian growth. However, as small businesses, they are likely to face credit rationing in financial markets. If true then policies that promote lending to small businesses may yield substantial economy-wide returns. We examine the relationship between Small Business Administration (SBA) lending and local economic growth using a spatial econometric framework across a sample of 3,035 U.S. counties for the years 1980 to 2009. We find evidence that a county's SBA lending per capita is associated with direct negative effects on its income growth. We also find evidence of indirect negative effects on the growth rates of neighboring counties. Overall, a 10% increase in SBA loans per capita is associated with a cumulative decrease in income growth rates of about 2%.
Keywords: SBA Lending; Economic Growth; Spatial Econometrics; Small Businesses
JEL Codes: C31; E65; H25; O47; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SBA lending per capita (F34) | county’s income growth rates (R11) |
| SBA lending per capita (F34) | neighboring counties' income growth rates (O57) |
| neighboring counties' income growth rates (O57) | county’s income growth rates (R11) |
| control variables in neighboring counties (H73) | county’s income growth rates (R11) |
| SBA lending per capita (F34) | resources allocated to innovative firms (O31) |