Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud
Summary
NBER Working Paper 31364, issued June 2023, by Shan Aman-Rana, Daniel W. Gingerich and Sandip Sukhtankar, on the trade-off between screening and fraud in the Paycheck Protection Program (PPP). Using a database of nearly 11.5 million PPP loans, the authors exploit changes over time in the documentation standards applied to loans of different values. They find that screening significantly reduced the incidence and size of loan irregularities indicative of fraud. Borrowers with a checkered history cut their requested amounts to stay under the screening threshold, while other borrowers did so at a much lower rate. The estimates imply that screening reduced losses due to fraud by at least $744 million.
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Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud Shan Aman-Rana , Daniel W. Gingerich & Sandip Sukhtankar Working Paper 31364 DOI 10.3386/w31364 Issue Date June 2023 Screening requirements are common features of fraud and corruption mitigation efforts around the world. Yet imposing these requirements involves trade-offs between higher administrative costs, delayed benefits, and exclusion of genuine beneficiaries on one hand and lower fraud on the other. We examine these trade-offs in one of the largest economic relief programs in US history: the Paycheck Protection Program (PPP). Employing a database that includes nearly 11.5 million PPP loans, we assess the impact of screening by exploiting temporal variation in the documentation standards applied to loan applications for loans of different values. We find that screening significantly reduced the incidence and magnitude of various measures of loan irregularities that are indicative of fraud. Moreover, our analysis reveals that a subset of borrowers with a checkered history strategically reduced their loan application amounts in order to avoid being subjected to screening. Borrowers without a checkered history engaged in this behavior at a much lower rate, implying that the documentation requirement reduced fraud without imposing an undue administrative burden on legitimate firms. All told, our estimates imply that screening led to a reduction in losses due to fraud equal to at least $744 million. - Copy Citation Shan Aman-Rana, Daniel W. Gingerich, and Sandip Sukhtankar, "Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud," NBER Working Paper 31364 (2023), https://doi.org/10.3386/w31364. Download Citation More from the NBER In addition to working papers , the NBER disseminates affiliates’ latest findings through a range of free periodicals—the NBER Reporter , the NBER Digest , the Bulletin on Health , the Bulletin on the Economics of Alzheimer's , and the Bulletin on Entrepreneurship —as well as research spotlights, lectures, and panel videos . - Feldstein Lecture - Presenter: Mark Duggan Mark Duggan, who is currently the Wayne and Jodi Cooperman Professor of Economics at Stanford University and will soon... - Methods Lectures Research Associate Melissa Dell of Harvard University and Ashesh Rambachan of MIT delivered the 2026 Methods...
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