Credit Access among Formerly Justice-Involved Entrepreneurs: Regression Discontinuity Evidence

Michael Mueller-Smith, associate professor of economics at the University of Michigan, will present, “Credit Access among Formerly Justice-Involved Entrepreneurs: Regression Discontinuity Evidence from the Paycheck Protection Program,” as part of the CPR Seminar Series (co-sponsored by the Economics Department). 

Abstract: We study the impact of credit access among entrepreneurs within the justice-involved community. First, we link the Survey of Business Owners to respondents' criminal histories, finding that small business owners with criminal records receive less loan-based start-up and expansion capital and are more likely to report ceasing operations due to financial constraints. Second, we utilize a discrete criminal history-based eligibility rule from the Paycheck Protection Program in a regression discontinuity design, estimating the causal effect of federal loans on entrepreneurs with prior felony convictions. We find that loan eligibility improves business outcomes, reduces wage employment, and decreases future recidivism.