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Evaluating the effects of Small Business Administration lending on growth

Author

Listed:
  • Matthew J. Higgins

    (University of Utah
    Max Planck Institute for Innovation and Competition
    NBER)

  • Donald J. Lacombe

    (Texas Tech University)

  • Briana S. Stenard

    (Mercer University)

  • Andrew T. Young

    (Texas Tech 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 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.

Suggested Citation

  • Matthew J. Higgins & Donald J. Lacombe & Briana S. Stenard & Andrew T. Young, 2021. "Evaluating the effects of Small Business Administration lending on growth," Small Business Economics, Springer, vol. 57(1), pages 23-45, June.
    • Handle: RePEc:kap:sbusec:v:57:y:2021:i:1:d:10.1007_s11187-019-00291-1
    DOI: 10.1007/s11187-019-00291-1
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