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The Direct and Indirect Effects of Small Business Administration Lending on Growth: Evidence from U.S. County-Level Data

Andrew Young (), Matthew Higgins (), Donald Lacombe and Briana Sell
Additional contact information
Donald Lacombe: West Virginia University, College of Business and Economics
Briana Sell: Georgia Institute of Technology

No 14-35, Working Papers from Department of Economics, West Virginia University

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 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: Small Business Administration; guaranteed loans; economic growth; income growth; entrepreneurship; US counties; spatial econometrics; spillovers (search for similar items in EconPapers)
JEL-codes: C23 E65 H25 O47 R11 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2014-12
New Economics Papers: this item is included in nep-ent, nep-fdg, nep-geo, nep-gro, nep-pbe, nep-sbm and nep-ure
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Working Paper: The Direct and Indirect Effects of Small Business Administration Lending on Growth: Evidence from U.S. County-Level Data (2014) Downloads
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