Polls, Politics and Disaster Relief: Evidence from Federal SBA Loan Programs

51 Pages Posted: 22 Mar 2021

See all articles by S. Abraham Ravid

S. Abraham Ravid

Yeshiva University - Syms School of Business

Kose John

New York University (NYU) - Department of Finance

Balbinder Singh Gill

Temple University - Fox School of Business and Management

Jongmoo Jay Choi

Temple University; National Bureau of Economic Research (NBER); Temple University - International Business

Date Written: March 4, 2021

Abstract

We study how the popularity of an incumbent president can influence the generosity of the relief effort in response to a natural disaster as reflected in the federal SBA loan program. We document that the loan amounts relative to reported damages are higher when popularity of the incumbent president is lower. This result is consistent with the catering view of disaster relief where the president approves higher amounts when his popularity is at a low point but may hold his ground when his popularity is high. We find that this catering behavior is amplified when public sentiment regarding the disaster is high (as measured by a metric designed from Google search volume).When the public sentiment is very high even a popular president may approve high disaster aid, further supporting our catering view. We also examine the effect of other factors that increase the political importance of the disaster (e.g., swing county, campaign donations, first term, and number of presidential visits) and find evidence of increased catering. Finally, there is some evidence of interaction of catering with credit scoring rules, suggesting discrimination in loan provision in favor of richer counties and against counties with a high percentage of African Americans. Our findings point to a new venue for politics in climate change in the area of disaster relief.

Keywords: Business disaster loan program, climate change, distress relief, US President, natural disasters, political catering, public sentiment.

JEL Classification: G21, G32, Q54

Suggested Citation

Ravid, S. Abraham and John, Kose and Gill, Balbinder Singh and Choi, Jongmoo Jay, Polls, Politics and Disaster Relief: Evidence from Federal SBA Loan Programs (March 4, 2021). NYU Stern School of Business Forthcoming, Available at SSRN: https://ssrn.com/abstract=3797341 or http://dx.doi.org/10.2139/ssrn.3797341

S. Abraham Ravid (Contact Author)

Yeshiva University - Syms School of Business ( email )

United States

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

Balbinder Singh Gill

Temple University - Fox School of Business and Management ( email )

Philadelphia, PA 19122
United States

Jongmoo Jay Choi

Temple University ( email )

Fox School of Business
Temple University
Philadelphia, PA 19122
United States
215-204-5084 (Phone)
215-204-1697 (Fax)

HOME PAGE: http://astro.temple.edu/~jjchoi

National Bureau of Economic Research (NBER)

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Temple University - International Business ( email )

Philadelphia, PA 19122
United States

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