Do Government Guaranteed Small Business Loans Increase Employment? Evidence From US Counties, 2010-2016

Jeong, Joowon

doi:10.52372/jps38202

J. Policy Stud. 2023; 38(2):11-21

pISSN: 2799-9130, eISSN: 2800-0714

DOI: https://doi.org/10.52372/jps38202

Article

Do Government Guaranteed Small Business Loans Increase Employment? Evidence From US Counties, 2010-2016

Joowon Jeong ¹

Author Information & Copyright ▼

¹Public Administration, College of Politics & Economics, Kyung Hee University

ⓒ Copyright 2023 Graduate School of Public Administration, Seoul National University. This is an Open-Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.

Received: Jan 15, 2023; Accepted: May 22, 2023

Published Online: Jun 30, 2023

Abstract

Small businesses in lower-income communities and/or communities with a higher proportion of minorities are more likely to face credit rationing in the financial market. The Small Business Administration (SBA) established loan programs to alleviate the financial constraints experienced by small businesses, particularly those in underserved communities, and to foster economic development. Using data from the SBA’s 7(a) and 504 lending programs and the seven-year county panels from 2010 to 2016, this study provides some evidence that an increase in SBA loans had a positive effect on employment in lower-income counties, particularly where the proportion of the black population was higher.

Keywords: Small Business Administration (SBA); guaranteed loans; employment; minority; low-and moderate-income