An official website of the United States government
How do differences in bank or lending institution type shape access to credit for small businesses in poor and/or minority communities in the United States? Banking systems are populated by lenders that differ qualitatively in their organizational forms, business models and missions, and that connect—or fail to connect—to small business borrowers and local communities in divergent ways. The authors analyze data on the Paycheck Protection Program and its over 11 million loans made to businesses across the United States to trace how these differences shaped the flow of credit to poor and minority communities. The authors find substantial differences across seven lender types, both in their propensities to avoid or lend to firms in traditionally marginalized communities, and in how much they lend to poor and majority–minority communities relative to their nonpoor and majority White counterparts. From this variety within American banking, the authors identify two potential pathways for more inclusive lending.
more »
« less
The Impact of Consumer Credit Access on Unemployment
Abstract Unemployed households’ access to unsecured revolving credit more than tripled over the last three decades. This article analyses how both cyclical fluctuations and trend increases in credit access impact the business cycle. The main quantitative result is that credit expansions and contractions have contributed to moderately deeper and more protracted recessions over the last 40 years. As more individuals obtained credit from 1977 to 2010, cyclical credit fluctuations affected a larger share of the population and became more important determinants of employment dynamics. Even though business cycles are more volatile, newborns strictly prefer to live in the economy with growing, but fluctuating, access to credit markets.
more »
« less
- Award ID(s):
- 1824422
- PAR ID:
- 10147865
- Date Published:
- Journal Name:
- The Review of Economic Studies
- Volume:
- 86
- Issue:
- 6
- ISSN:
- 0034-6527
- Page Range / eLocation ID:
- 2605 to 2642
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
More Like this
-
-
This paper studies the rise of direct lending using a comprehensive dataset of investments by business development companies (BDC). We exploit three exogenous shocks to credit supply, including new banking regulations and a major finance company collapse, to establish that BDC capital acts as a substitute for traditional financing. Using firm-level data, we further document that firms’ access to BDC funding stimulates their employment growth and patenting activity. Beyond credit provision, BDCs contribute to firm growth through managerial assistance.more » « less
-
This paper studies the rise of direct lending using a comprehensive dataset of investments by business development companies (BDC). We exploit three exogenous shocks to credit supply, including new banking regulations and a major finance company collapse, to establish that BDC capital acts as a substitute for traditional financing. Using firm-level data, we further document that firms’ access to BDC funding stimulates their employment growth and patenting activity. Beyond credit provision, BDCs contribute to firm growth through managerial assistance.more » « less
-
null (Ed.)We examine how consumer credit affects entrepreneurship by linking three million earnings and pass-through tax records to credit reports. In the cross-section, we show that self-employment without employees and employer firm ownership increase monotonically with credit limits and credit scores. We then isolate individuals who have had discrete increases in credit limits after the exogenous removal of bankruptcy flags to measure the effects of personal credit on entrepreneurship. Following bankruptcy flag removal, individuals are more likely to start a new employer business and borrow extensively. Those who own businesses with employees borrow $40,000 more after bankruptcy flag removal, a 33% gain relative to the sample average.more » « less
-
The objective of this study is to examine spatial patterns of disaster impacts and recovery of communities based on fluctuations in credit card transactions (CCTs). Such fluctuations could capture the collective effects of household impacts, disrupted accesses, and business closures and thus provide an integrative measure for examining disaster impacts and community recovery. Existing studies depend mainly on survey and sociodemographic data for disaster impacts and recovery effort evaluations, although such data has limitations, including large data collection efforts and delayed timeliness results. Also, there are very few studies have concentrated on spatial patterns of disaster impacts and short-term recovery of communities, although such investigation can enhance situational awareness during disasters and support the identification of disparate spatial patterns of disaster impacts and recovery in the impacted regions. This study examines CCTs data Harris County (Texas, USA) during Hurricane Harvey in 2017 to explore spatial patterns of disaster impacts and recovery duration from the perspective of community residents and businesses at ZIP-code and county scales, respectively, and to further investigate their spatial disparities across ZIP codes. The results indicate that individuals in ZIP codes with populations of higher income experienced more severe disaster impact and recovered more quickly than those located in lower income ZIP codes for most business sectors. Our findings not only enhance the understanding of spatial patterns and disparities in disaster impacts and recovery for better community resilience assessment but also could benefit emergency managers, city planners, and public officials in enhanced situational awareness and resource allocation.more » « less
- Free Publicly Accessible Full Text
-
Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1093/restud/rdz006
