Racial Disparities in the Paycheck Protection Program
Using a large sample of Florida restaurants, we document significant racial disparities in borrowing through the Paycheck Protection Program (PPP) and investigate the causes of these disparities. Black-owned restaurants are 25% less likely to receive PPP loans. Restaurant location explains 5 percentage points of this differential. Restaurant characteristics explain an additional 10 percentage points of the gap in PPP borrowing. On average, prior borrowing relationships do not explain disparities. The remaining 10% disparity is driven by a 17% disparity in PPP borrowing from banks, which is partially offset by greater borrowing from nonbanks, largely fintechs. Disparities in PPP borrowing cannot be attributed to lower awareness of PPP loans or lower demand for PPP loans by minority-owned restaurants. Black-owned restaurants are significantly less likely to receive bank PPP loans in counties with more racial bias. In these counties, Black-owned restaurants are more likely to substitute to nonbank PPP loans. This substitution, however, is not strong enough to eliminate racial disparities in PPP borrowing. Finally, we show that our findings apply more broadly across industries in a sample of firms that were likely eligible for PPP.
We thank Mike Faulkender (discussant), Ed Glaeser, Nathan Kaplan, Olivia Kim, Ben McCartney, Ken Okamura, David Robinson, Claire Shi, Chris Stanton, Adi Sunderam, Constantine Yannelis (discussant), Eric Zwick, and seminar participants at Carnegie Mellon, NBER Corporate Finance, NBER Entrepreneurship, and Oxford for helpful comments and suggestions. We are very grateful to Jessica Mouras and Will Langston of Yelp for the care with which they assembled the Yelp restaurant data used in this paper, and we thank SafeGraph for allowing us to access their geolocation data. Viet-Dung Doan, Ryan Gilland, and Dean Xu provided excellent research assistance. For financial support, Sergey Chernenko thanks the Blake Family Fund for Ethics, Leadership and Governance, and David Scharfstein thanks the Harvard Business School Division of Research. Disclosure: David Scharfstein is on the board of directors of M&T Bank Corporation, which made loans through the Paycheck Protection Program. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- The Paycheck Protection Program (PPP) was one of the largest measures undertaken by the federal government to protect businesses and...