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Did the Paycheck Protection Program Hit the Target?

João Granja (), Christos Makridis (), Constantine Yannelis () and Eric Zwick ()
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João Granja: University of Chicago - Booth School of Business
Christos Makridis: Massachusetts Institute of Technology - Sloan School of Management
Constantine Yannelis: University of Chicago - Booth School of Business and NBER
Eric Zwick: University of Chicago - Booth School of Business and NBER

Working Papers from Becker Friedman Institute for Research In Economics

Abstract: This paper takes an early look at the Paycheck Protection Program (PPP), a large and novel small business support program that was part of the initial policy response to the COVID-19 pandemic. We use new data on the distribution of the first round of PPP loans and high-frequency micro-level employment data to consider two dimensions of program targeting. First, we do not find evidence that funds flowed to areas more adversely affected by the economic effects of the pandemic, as measured by declines in hours worked or business shutdowns. If anything, funds flowed to areas less hard hit. Second, we find significant heterogeneity across banks in terms of disbursing PPP funds, which does not only reflect differences in underlying loan demand. The top-4 banks alone account for 36% of total pre-policy small business loans, but disbursed less than 3% of all PPP loans in the first round. Areas that were significantly more exposed to low-PPP banks received much lower loan allocations. We do not find evidence that the PPP had a substantial effect on local economic outcomes—including declines in hours worked, business shutdowns, initial unemployment insurance claims, and small business revenues—during the first round of the program. Firms appear to use first round funds to build up savings and meet loan and other commitments, which points to possible medium-run impacts. As data become available, we will continue to study employment and establishment responses to the program and the impact of PPP support on the economic recovery. Measuring these responses is critical for evaluating the social insurance value of the PPP and similar policies.

Keywords: PPP; stimulus; loan guarantees; CARES; COVID-19; coronavirus (search for similar items in EconPapers)
JEL-codes: G21 G38 H32 H81 (search for similar items in EconPapers)
Pages: 85 pages
Date: 2020
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