Does the Community Reinvestment Act increase lending to small businesses in lower income neighborhoods?

Mee Jung Kim, Kyung Min Lee and John Earle

Economics Letters, 2021, vol. 209, issue C

Abstract: We estimate the impact of the Community Reinvestment Act (CRA) on small business lending in lower-income neighborhoods. Using 2004–2016 panel data on census tracts, we apply a combined regression discontinuity and fixed effect method. We find that the number of small business loans increases by about 3 to 7 percent and the total dollar amount of small business loans by about 6 to 10 percent in tracts becoming treated by the CRA. The results are robust along many dimensions and suggest that the CRA has a positive impact on access to finance for small businesses in lower income areas.

Keywords: Financial constraints; Small business lending; Community Reinvestment Act; Lower income neighborhood (search for similar items in EconPapers)
JEL-codes: G21 G28 R58 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:209:y:2021:i:c:s0165176521004237

DOI: 10.1016/j.econlet.2021.110146

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