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Did the Paycheck Protection Program Hit the Target?

Author

Listed:
  • 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)

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.

Suggested Citation

  • João Granja & Christos Makridis & Constantine Yannelis & Eric Zwick, 2020. "Did the Paycheck Protection Program Hit the Target?," Working Papers 2020-52_Revised, Becker Friedman Institute for Research In Economics.
  • Handle: RePEc:bfi:wpaper:2020-52_revised
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    More about this item

    Keywords

    PPP; stimulus; loan guarantees; CARES; COVID-19; coronavirus;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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