When Should Public Programs be Privately Administered? (NBER Working Paper 27623)

Summary

An NBER Working Paper 27623, “When Should Public Programs be Privately Administered? Theory and Evidence from the Paycheck Protection Program” by Alexander W. Bartik, Zoe B. Cullen, Edward L. Glaeser, Michael Luca, Christopher T. Stanton and Adi Sunderam, with an Issue Date of July 2020 and a Revision Date of July 2023. The abstract says the Paycheck Protection Program relied on private banks to disburse aid to small businesses rapidly. It states that banks did target loans to their most valuable pre-existing customers, and that delegation was likely superior to delaying loans to improve targeting. The model shows delegation is optimal when delay is sufficiently costly, variation across firms in the impact of funds is small, and alignment between public and private objectives is high.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

When Should Public Programs be Privately Administered? Theory and Evidence from the Paycheck Protection Program

Alexander W. Bartik , Zoe B. Cullen , Edward L. Glaeser , Michael Luca , Christopher T. Stanton & Adi Sunderam

Working Paper 27623

DOI 10.3386/w27623

Issue Date July 2020

Revision Date July 2023

What happens when public resources are allocated by private companies whose objectives may be imperfectly aligned with policy goals? We study this question in the context of the Paycheck Protection Program (PPP), which relied on private banks to disburse aid to small businesses rapidly. Our model shows that delegation is optimal when delay is sufficiently costly, variation across firms in the impact of funds is small, and the alignment between public and private objectives is high. We use novel firm-level survey data that contains information on banking relationships to measure heterogeneity in the impact of PPP and to assess whether banks targeted loans to high-impact firms. Banks did target loans to their most valuable pre-existing customers. However, using an instrumental variables approach that exploits variation in banks’ loan processing speeds, we find that treatment effect heterogeneity is sufficiently moderate, delay is sufficiently costly, and bank and social objectives are sufficiently aligned that delegation was likely superior to delaying loans to improve targeting.

- Copy Citation Alexander W. Bartik, Zoe B. Cullen, Edward L. Glaeser, Michael Luca, Christopher T. Stanton, and Adi Sunderam, "When Should Public Programs be Privately Administered? Theory and Evidence from the Paycheck Protection Program," NBER Working Paper 27623 (2020), https://doi.org/10.3386/w27623. 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...

File and source

File

w27623_acae109aa84ad6ec.html

Size

97,769 bytes

SHA-256

5e73b9820ee497f43b774eedb23eb26973676930418f8e1dfe815c52fa6d8c96

Our copy

w27623_acae109aa84ad6ec.html

Original

www.nber.org