Working Paper: NBER ID: w29732
Authors: Robert W. Fairlie; Frank Fossen
Abstract: 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.
Keywords: Paycheck Protection Program; minority communities; loan disbursement; small businesses
JEL Codes: J15; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| PPP loan flows (H81) | minority share of the population or businesses (J15) |
| first draw loans (G51) | minority share of the population or businesses (J15) |
| second draw loans (G51) | minority share of the population or businesses (J15) |
| PPP loan flows (H81) | minority communities received funds (J15) |
| PPP loan disbursement process alterations (H81) | access for minority communities (J15) |
| first draw loans (G51) | inequities persistence (I24) |
| first round of 2020 PPP loans (H81) | negative relationship with minority share (G39) |
| second round of 2020 PPP loans (H81) | less positive relationship with minority share (G39) |
| nonemployer businesses (M13) | strong positive relationship with minority share (J15) |