Discrimination in Lending? Evidence from the Paycheck Protection Program

45 Pages Posted: 1 Feb 2021 Last revised: 22 Jun 2021

See all articles by Rachel M. B. Atkins

Rachel M. B. Atkins

New York University (NYU) - Department of Management and Organizational Behavior

Lisa D. Cook

Michigan State University - Department of Economics and James Madison College; NBER

Robert Seamans

New York University (NYU) - Leonard N. Stern School of Business

Date Written: May 31, 2021

Abstract

We assess the role of race in loans made through the Paycheck Protection Program (PPP). The PPP program, created by the U.S. government as a response to the Covid-19 pandemic, provides loans to small businesses so they can keep employees on their payroll. We argue that the historical record and PPP program design choices made it likely that many Black-owned businesses received smaller PPP loans than White-owned businesses. Using newly released data on the PPP program, we find that Black-owned businesses received loans that were approximately 50 percent lower than observationally similar White-owned businesses. The effect is marginally smaller in areas with more bank competition and disappeared over time as changes to the PPP program were implemented allowing for entry by fintechs and other non-traditional lenders.

Keywords: Minority-owned firms, Racial discrimination, Discrimination in financial markets, Overcoming discriminatory barriers

JEL Classification: G21, J16, L2, L26

Suggested Citation

Atkins, Rachel and Cook, Lisa D. and Seamans, Robert, Discrimination in Lending? Evidence from the Paycheck Protection Program (May 31, 2021). Available at SSRN: https://ssrn.com/abstract=3774992 or http://dx.doi.org/10.2139/ssrn.3774992

Rachel Atkins

New York University (NYU) - Department of Management and Organizational Behavior ( email )

44 West 4th Street
New York, NY 10012
United States

Lisa D. Cook

Michigan State University - Department of Economics and James Madison College ( email )

South Case Hall
East Lansing, MI 48825-1205
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert Seamans (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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