The Direct and Indirect Effects of Small Business Administration Lending on Growth: Evidence from U.S. County-Level Data

47 Pages Posted: 26 Sep 2014

See all articles by Andrew T. Young

Andrew T. Young

Texas Tech University - Rawls College of Business

Matthew John Higgins

University of Utah - Department of Entrepreneurship & Strategy; National Bureau of Economic Research (NBER); Max Planck Institute for Innovation and Competition

Donald J. Lacombe

West Virginia University - Regional Research Institute

Briana Stenard

Mercer University - Eugene W. Stetson School of Business and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 24, 2014

Abstract

Conventional wisdom suggests that small businesses are innovative engines of Schumpetarian growth. However, as small businesses, they are likely to face credit rationing in financial markets. If true then policies that promote lending to small businesses may yield substantial economy-wide returns. We examine the relationship between Small Business Administration (SBA) lending and local economic growth using a spatial econometric framework across a sample of 3,035 U.S. counties for the years 1980 to 2009. We find evidence that a county’s SBA lending per capita is associated with direct negative effects on its income growth. We also find evidence of indirect negative effects on the growth rates of neighboring counties. Overall, a 10% increase in SBA loans per capita is associated with a cumulative decrease in income growth rates of about 2%.

Keywords: Small Business Administration, guaranteed loans, economic growth, income growth, entrepreneurship, US counties, spatial econometrics, spillovers

JEL Classification: O47; E65; R11; H25; C23

Suggested Citation

Young, Andrew T. and Higgins, Matthew John and Lacombe, Donald J. and Stenard, Briana, The Direct and Indirect Effects of Small Business Administration Lending on Growth: Evidence from U.S. County-Level Data (September 24, 2014). Available at SSRN: https://ssrn.com/abstract=2500825 or http://dx.doi.org/10.2139/ssrn.2500825

Andrew T. Young (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

Matthew John Higgins

University of Utah - Department of Entrepreneurship & Strategy ( email )

1655 East Campus Center Dr.
Salt Lake City, UT 84112
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Max Planck Institute for Innovation and Competition ( email )

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Munich, Bayern 80539
Germany

Donald J. Lacombe

West Virginia University - Regional Research Institute ( email )

P.O. Box 6825
Morgantown, WV 26506-6825
United States
1-304-293-8543 (Phone)
1-304-293-6699 (Fax)

HOME PAGE: http://community.wvu.edu/~djl041/

Briana Stenard

Mercer University - Eugene W. Stetson School of Business and Economics ( email )

United States

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