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Effect of the Small Business Administration on Small Business Lending Markets and Activity

  • Author(s): Morgulis, Yana
  • et al.
Abstract

In the first chapter, I take advantage of a regime change that introduced competition into a market initially defined by sanctioned monopolies to study the impact of changing incentives on firm behavior. The market is the 504 Loan Program administered by the Small Business Administration and defined by fixed prices which allow the analysis to study changes on other margins. The study focuses on changes in market concentration, loan volume, risk profile, and firm rents. Findings are consistent with a theoretical model of relaxing geographic boundaries and increasing competition. Using a linked database based on a list of all Small Business Administration (SBA) loans in 1992 to 2011 and annual information on all U.S. employers from 1976 to 2012, the second chapter applies detailed matching and regression methods to estimate the variation in SBA loan effects on job creation across firm age and size groups. The firm-level proportional impact of loan receipt is estimated to fall with pre-loan firm size and age, and is largest for start-ups and very young and very small firms. The number of jobs created per million dollars of loans is also estimated to be highest for start -ups but otherwise generally increases with size and age. The estimated survival impact of loan amount is larger for smaller and younger firms. The final chapter takes advantage of a unique investigation by a local utility company within a single metropolitan area to relate cultural norms of residents to identified instances of fraud. We base the cultural norms index on the country of birth and the associated country corruption index of residents and generate counts of location-based utilities fraud based on the data from the investigation. The analysis results in a large and persistent positive correlation between the cultural norms index and fraud variables suggesting that there exists a strong relationship between cultural norms and the likelihood of engaging in fraud

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