Abstract
This study examines the relationship between the U.S. Small Business Administration’s (SBA) lending programs and state-level employment from the early 1990s to 2013 using quarterly panel data for U.S. states with fixed effects. The results show a positive statistical relationship between the growth in SBA lending per capita and the change in the state’s civilian employment rates. Despite these statistically significant relationships, the coefficient sizes are small. An analysis of high and low personal income states shows no meaningful differences in the relationship between SBA lending and employment across these groups. These findings support the idea that SBA lending programs may help with the public policy goal of assisting small businesses and may contribute to the finance–growth nexus.
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Notes
U.S. Small Business Administration (SBA) loan program performance is available on their website: https://www.sba.gov/sites/default/files/aboutsbaarticle/WDS_Table1_UPB_Report.pdf
See the SBA Weekly Lending reports, which are made available on their website: https://www.sba.gov/about-sba/sba-newsroom/weekly-lending-report.
This terminology could be credited to Jayaratne and Strahan (1996).
The empirical analysis experimented with a time trend dummy, but this was subsequently dropped, as it was not statistically significant and did not add to the overall explanatory power of the models.
See Davidson and MacKinnon (2004, pp 214–15).
In contrast, Armstrong et al. (2014), Craig et al. (2007), and Craig et al. (2008) did not consider recessions in their analysis that was confined to a period between 1991 and 2001. However, Brown and Earle (2017) offer a dummy variable for the high unemployment period in their study that covered the period from 1992 until 2009, so this would have acted in a similar manner as the NBER variable.
PLP is a designation given to certain banks by the SBA that allows them to authorize guaranteeing loans on behalf of the U.S. SBA without the SBA’s prior review.
Other variables, such as education, were considered, but the change in state-level college educated population as a percentage of the entire population was not significant.
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Orzechowski, P.E. U.S. Small Business Administration loans and U.S. state-level employment. J Econ Finan 44, 486–505 (2020). https://doi.org/10.1007/s12197-019-09495-3
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DOI: https://doi.org/10.1007/s12197-019-09495-3