Abstract
Social distancing restrictions and health- and economic-driven demand shifts from COVID-19 shut down many small businesses with especially negative impacts on minority owners. Is there evidence that the unprecedented federal government response to help small businesses—the Paycheck Protection Program (PPP) and the related COVID-19 Economic Injury Disaster Loans (EIDL)—which had a stated goal of helping disadvantaged groups, was disbursed evenly to minority communities? In this descriptive research note, we provide the first detailed analysis of how the 2020 PPP and EIDL funds were disbursed across minority communities in the country. From our analysis of data on the universe of loans from these programs and administrative data on employer firms, we generally find a slightly positive relationship between PPP loan receipt per business and the minority share of the population or businesses, although funds flowed to minority communities later than to communities with lower minority shares. PPP loan amounts per employee, however, are negatively related to the minority share of the population. The EIDL program, in contrast, both in numbers per business and amounts per employee, was distributed positively to minority communities.
Highlights
The widespread closing of stores and businesses in the USA and around the world due to the coronavirus is unprecedented
There is some evidence, that the first round of funds was disproportionately disbursed to non-minority communities and the second round of funds was disproportionately disbursed to minority communities
Given the shutdown of the economy to slow down the spread of the novel coronavirus, Congress agreed to a massive level of expenditures in the 2020 CARES Act to help small businesses stay open and retain employees
Summary
The widespread closing of stores and businesses in the USA and around the world due to the coronavirus is unprecedented. Did the PPP and EIDL programs, which provided 15 million loans or advances worth more than $850 billion to small businesses, get disbursed to minority communities benefitting the businesses and employees in those communities? We find a strong positive relationship in the receipt per business of these loans and advances by minority share of the population These results build on the findings from a few related working papers on the PPP program. EIDL loan and advance amounts are complete We compare these measures of loan receipt per employer business establishment and loan amounts per employee to data from the Census of Population on the minority share of the population across communities. The minority share of the population across zip codes has a mean of 0.389 and the minority share of employer businesses has a lower mean of 0.180 reflecting substantially lower business ownership rates among minorities
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