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Self-Reporting Race in Small Business Loans: A Game-Theoretic Analysis of Evidence from PPP Loans in Durham, NC

Author

Listed:
  • Raffi E. García
  • William A. Darity Jr.

Abstract

Using hand-collected race information about small business owners that concealed their race in Paycheck Protection Program applications, we find evidence that not disclosing race information in loan applications pays off significantly. Our results show that Black-owned businesses that concealed their race obtained 52 percent more in funding than self-reported Black-owned businesses. Interestingly, White-owned businesses that also concealed their race information obtained approximately 10 percent more in funding relative to self-reported White-owned businesses. However, the effect is not statistically significant. Our findings are consistent with a prisoner's dilemma theoretical framework in which all participants are better off by not self-reporting race.

Suggested Citation

  • Raffi E. García & William A. Darity Jr., 2022. "Self-Reporting Race in Small Business Loans: A Game-Theoretic Analysis of Evidence from PPP Loans in Durham, NC," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 299-302, May.
    • Handle: RePEc:aea:apandp:v:112:y:2022:p:299-302
    DOI: 10.1257/pandp.20221031
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    Cited by:

    1. Jorge M. Agüero & Francisco Galarza & Gustavo Yamada, 2023. "(Incorrect) Perceived Returns and Strategic Behavior among Talented Low-Income College Graduates," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 423-426, May.
    2. Robert Fairlie & Frank M. Fossen, 2022. "The 2021 Paycheck Protection Program Reboot: Loan Disbursement to Employer and Nonemployer Businesses in Minority Communities," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 287-291, May.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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