Local Financial Impact of the Paycheck Protection Program: County Level Determinants

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Divyanshi Singhal


The Paycheck Protection Program (PPP) was one of the key components of the government’s response to the economic fallout of COVID-19. Enacted on March 27, 2020, the program had ambitious goals that included keeping workers off the unemployment rolls, boosting consumer spending, and ensuring small business continuity during the shutdown. Nonetheless, empirical evidence on the success of PPP is mixed. In order to contribute to this literature, I examine the impact of PPP loans on unemployment and consumer spending at the county level. Congress amended the PPP in 2021 by passing the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), which was intended to provide additional support to many small businesses. Since most of the existing studies are limited to 2020, I study PPP loans disbursed in both 2020 (pre-Economic Aid Act) and 2021 (post-Economic Aid Act). My study addresses the following three economic questions:

      i.        Did the Paycheck Protection Program result in lower unemployment rates in participating counties? 

     ii.        Did the Paycheck Protection Program stimulate consumer spending in participating counties? 

     iii.       Was aid given in 2021 through the Economic Aid Act more effective than the initial 2020 Paycheck Protection Program? 

Through pooled ordinary least squares (OLS) and fixed effects regressions, I find that the counties that received PPP loans experienced a decrease in unemployment rates and an increase in consumer spending. Additionally, my analysis indicates increased effectiveness of the PPP loans in 2021 relative to 2020. Overall, my analysis indicates that the PPP achieved its objectives.

Comments from Mentors

It was my pleasure working with Divyanshi. Her unwavering commitment to the process of scientific inquiry and her hard work and diligence on her undergraduate Honors thesis are truly exceptional. Her thesis addresses an important policy question on the economic effects of the Paycheck Protection Program. Her research methods and empirical analysis illustrate the local (county-level) economic benefits of PPP. By not shying away from tackling an important economic policy debate question on the role of PPP, Divyanshi demonstrated the impact and relevance of undergraduate thesis at TCU.

— Swaminathan Kalpathy

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Neeley School of Business