By Michael R. Strain

I recently highlighted two new papers on the Paycheck Protection Program (PPP). The evidence on PPP’s effects is continuing to grow, and I want to draw attention to another important paper by Michael Faulkender, Robert Jackman, and Stephen I. Miran. These economists attempt to capture PPP’s ability to maintain worker-firm connections by examining its relationship with claims for unemployment benefits.

The abstract of their paper,
“The Job-Preservation Effects of Paycheck Protection Program Loans,” is here:

The Paycheck Protection Program (PPP) covered in excess of 80% of eligible U.S. small business employment, supporting 51 million American jobs through the program’s close on August 8th, 2020. Of those supported jobs, how many would have been lost in the absence of PPP loans? To answer this question, we propose an empirical strategy to identify the effects of PPP loans on county-level unemployment insurance claims. Specifically, we exploit variation in the timing of loan receipt caused by differences in local banking market structure across US counties. On the margin, we estimate that a 10 percentage point increase in eligible payroll covered by PPP resulted in a 1 to 2 percentage point smaller jump in weekly initial unemployment insurance (UI) claims, as a share of employment covered by UI. With a lag, that same 10 percentage point increase in PPP coverage resulted in an estimated 5 percentage point smaller increase in the insured unemployment rate. In order to compare our estimates with related studies, we calculate an aggregate employment effect of PPP loans. Moving from the 25th percentile to 75th percentile of counties by early PPP coverage causes an improvement in the insured unemployment rate of over 12 percentage points, or, extrapolated nationally, 18.6 million jobs. We note meaningful caveats to interpreting this paper’s aggregate number; the same caveats that apply to other papers evaluating PPP loans. This paper’s estimates are an order of magnitude larger than previous evaluations of PPP, which have tended to find small employment effects or none at all.

Check out their full paper here.

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