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Racial disparities in US lending: the reform of the Paycheck Protection Program

Stefano Filomeni, Francesca Querci
October 2024 - n. 10
Keywords: Paycheck Protection Program, prestiti, minoranze etniche, disparità razziali
Jel codes: G01, G21, G28, J15

Introduced under the Trump-Pence Administration, small American businesses relied on the Paycheck Protection Program (Ppp) as a source of short-term relief loans during the heights of the Coronavirus pandemic. The initial design of the Ppp was heavily criticised by researchers as racial disparities, amongst others, existed within its lending process. Minority groups received less Ppp loan amounts during the original two tranches released in 2020. Aiming to increase equitable access to all, in February 2021 the Biden-Harris Administration enforced swift changes to the initial Ppp aimed at favouring access to Ppp loans for minority-owned small businesses that were disadvantaged by the original version of the program design. By exploiting a granular dataset of 2.1 million Ppp loans granted between Q2 2020 - Q2 2021 and by implementing a difference-in differences approach (Did), this paper provides novel evidence on the effectiveness of the Biden reforms in reducing racial disparities within the Paycheck Protection Program.

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