Evaluating the effects of Small Business Administration lending on growth

Matthew Higgins, Donald J. Lacombe, Briana S. Stenard () and Andrew T. Young
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Donald J. Lacombe: Texas Tech University
Briana S. Stenard: Mercer University
Andrew T. Young: Texas Tech University

Small Business Economics, 2021, vol. 57, issue 1, No 2, 23-45

Abstract: 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 and a sample of U.S. counties. 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 0.02 to 0.03 percentage points.

Keywords: Small Business Administration (SBA); Guaranteed loans; Economic growth; Income growth; Entrepreneurship; Spatial econometrics; Spillovers; O47; E65; R11; H25; C23; L26 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:sbusec:v:57:y:2021:i:1:d:10.1007_s11187-019-00291-1

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DOI: 10.1007/s11187-019-00291-1

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