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Do SBA Loans Create Jobs? Estimates from Universal Panel Data and Longitudinal Matching Methods

40 Pages Posted: 24 Oct 2012  

J. David Brown

US Census Bureau Center for Economic Studies; IZA Institute of Labor Economics

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

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Date Written: September 1, 2012

Abstract

This paper reports estimates of the effects of the Small Business Administration (SBA) 7(a) and 504 loan programs on employment, using a complete list of all SBA loans linked to annual data on all U.S. employers from 1976 to 2010. The estimation approach combines firm fixed effect regressions with matching, where the control groups are matched exactly on firm age, industry, year, and pre-loan size, as well as on propensity scores (kernel-weighted by distance) as a function of four years of employment history and other variables. The results imply positive average effects on loan recipient employment of about 25 percent, or 3 jobs at the mean. Including loan amount, we find little or no impact of loan receipt per se, but an increase of about 5.4 jobs for each million dollars of loans. When focusing on loan recipients and control firms located in high-growth counties (average growth of 22 percent), places where most small firms should have excellent growth potential, we find similar effects, implying that the estimates are not driven by differential demand conditions across firms. Results are also similar regardless of distance of control from recipient firms, suggesting only a very small role for displacement effects. In all these cases, the results pass a “pre-program” specification test, where controls and treated firms look similar in the pre-loan period. Other specifications, such as those using only matching or only regression, imply somewhat higher effects, but they fail the pre-program test.

Keywords: small business, job creation, finance, SBA, loans, employment, matching, panel data

JEL Classification: G21, G28, H32, H81, J23, L52

Suggested Citation

Brown, J. David and Earle, John S., Do SBA Loans Create Jobs? Estimates from Universal Panel Data and Longitudinal Matching Methods (September 1, 2012). GMU School of Public Policy Research Paper No. 2013-04. Available at SSRN: https://ssrn.com/abstract=2165931 or http://dx.doi.org/10.2139/ssrn.2165931

J. Brown

US Census Bureau Center for Economic Studies ( email )

4600 Silver Hill Road
Washington, DC 20233
United States
301-763-8769 (Phone)
301-763-5935 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

John Earle (Contact Author)

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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