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Do SBA Loans Create Jobs?

Author

Listed:
  • Brown, J. David

    () (U.S. Census Bureau)

  • Earle, John S.

    () (George Mason University)

Abstract

Small Business Administration (SBA) loans have long been one of the most significant policy interventions in the U.S. affecting firm behavior, but little is known about their outcomes. This paper estimates the effects on employment using a list of all SBA loans linked to annual data on all U.S. employers from 1976 to 2010. Our methods combine firm fixed-effect regressions with matching on exact firm age, industry, year, and pre-loan size, and on propensity scores as a function of four years of employment history and other variables. The results imply positive average effects on loan recipient employment of about 25 percent, or 3 jobs at the mean. Including loan amount, we find little or no impact of loan receipt per se, but an increase of about 5.4 jobs for each million dollars of loans. Similar results for high-growth counties and industries suggest the estimates are not driven by differential demand conditions across firms. Exploiting variation in the distance of controls from recipient firms, we find only very small displacement effects. In all these cases, the results pass "placebo" and "pre-program" specification tests. Other specifications using only matching or only regression imply somewhat higher effects, but they fail these tests. The estimates facilitate calculations of total job creation by the SBA and of the cost per job created.

Suggested Citation

  • Brown, J. David & Earle, John S., 2013. "Do SBA Loans Create Jobs?," IZA Discussion Papers 7544, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7544
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    References listed on IDEAS

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    1. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," Working Papers 10-17, Center for Economic Studies, U.S. Census Bureau.
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    12. David Neumark & Brandon Wall & Junfu Zhang, 2011. "Do Small Businesses Create More Jobs? New Evidence for the United States from the National Establishment Time Series," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 16-29, August.
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    Cited by:

    1. Emek Basker & Javier Miranda, 2014. "Taken By Storm: Business Survival In The Aftermath Of Hurricane Katrina," Working Papers 14-20, Center for Economic Studies, U.S. Census Bureau.
    2. Emek Basker & Javier Miranda, 2014. "Taken by Storm: Business Financing, Survival, and Contagion in the Aftermath of Hurricane Katrina," Working Papers 1406, Department of Economics, University of Missouri, revised 23 Oct 2014.
    3. C.J. Krizan, 2015. "Statistics on the International Trade Administration's Global Markets Program," Working Papers 15-17, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    Keywords

    small business finance; entrepreneurship; employment; program evaluation;

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - 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
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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