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Better late than never? Quantifying funding and liquidity effects of the PPP on pandemic-era employment recovery

Author

Listed:
  • Gorbachev, Olga
  • Luengo-Prado, Maria J.
  • Wang, J.Christina

Abstract

This paper examines how the Paycheck Protection Program (PPP) supported employment during the COVID-19 period by distinguishing between its short-term liquidity and broader funding effects. Using county-level data, we show that delays in loan disbursement had prolonged negative impacts only on the smallest urban businesses. To identify the causal impact of funding itself, we develop an instrument based on the pre-pandemic payroll share in small establishments. Instrumental-variable and firm-level analyses reveal that PPP funding improved business survival and employment recovery substantially and broadly, with an estimated cost of roughly $89,000 per job-year, consistent with other large-scale fiscal interventions.

Suggested Citation

  • Gorbachev, Olga & Luengo-Prado, Maria J. & Wang, J.Christina, 2026. "Better late than never? Quantifying funding and liquidity effects of the PPP on pandemic-era employment recovery," Journal of Public Economics, Elsevier, vol. 258(C).
    • Handle: RePEc:eee:pubeco:v:258:y:2026:i:c:s0047272726000770
    DOI: 10.1016/j.jpubeco.2026.105641
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    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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