Do Government Guaranteed Small Business Loans Promote Economic Growth and Entrepreneurship?
نویسنده
چکیده
This paper examines the impact of government guaranteed small business loans on economic growth, and whether government guaranteed loans crowd out new businesses financed through the market. OLS estimates indicate a significant and positive relation between the Small Business Administration’s (SBA) guaranteed loans and metropolitan growth between 1993 and 2002. However, endogeneity hinders causal interpretation. In order to generate plausibly exogenous variation in SBA guaranteed loans, I use years since interstate banking deregulation and the historical density of SBA lenders in the metropolitan area as instrumental variables. Metropolitan areas that deregulated earlier see more market entrepreneurship and less SBA guaranteed loans. Areas with higher densities of SBA lenders in 1985 approve more SBA loans in 1993. Despite the strong first stage results, the 2SLS estimates show zero growth impact from SBA guaranteed loans. I further find that government-backed entrepreneurship crowds out market entrepreneurship one for one.
منابع مشابه
Do Government Guaranteed Small Business Loans Promote Urban Growth?
This paper examines the impact of government guaranteed small business loans on urban economic growth, and compares the growth impacts of government versus market financed entrepreneurship. OLS estimates indicate a significant and positive relation between the Small Business Administration’s guaranteed loans and metropolitan growth between 1993 and 2002. However, first-difference and instrument...
متن کاملEntrepreneurship, Small Businesses, and Urban Growth
Entrepreneurship is widely believed to be a main source of economic growth. This paper’s objective is threefold: (1) to estimate the impact of entrepreneurship measured by the birth of businesses on urban employment and income growth; (2) to examine how entrepreneurship supported by government guaranteed loans compares with market entrepreneurship regarding its impact on urban growth; and (3) t...
متن کاملSBA Guaranteed Lending and Local Economic Growth
Increasingly, policymakers look to the small business sector as a potential engine of economic growth. Policies to promote small businesses include tax relief, direct subsidies, and indirect subsidies through government lending programs. Encouraging lending to small business is the primary policy objective of the Small Business Administration’s (SBA) loan-guarantee program. Using a panel data s...
متن کاملImpact of Tight Money and/or Recessions on Small Business
The opinions and recommendations of the authors of this study do not necessarily reflect official positions of the SBA or other agencies of the U.S. government. Executive Summary The long expansion, two recessions, and financial disruptions affected businesses of all sizes over the past dozen years. Small businesses may be particularly exposed to recessions, banking conditions, and monetary pol...
متن کاملThe Indian Environment for Entrepreneurship and Small Business Development
India is touted as a new entrepreneurship powerhouse and the next Asian miracle. There have been some successful and many unsuccessful attempts to promote entrepreneurship and small business development in India. There are also some well-founded rationales as well as a number of misinformed and ill guided viewpoints about the friendliness of environment to support entrepreneurship and small bus...
متن کامل