Do Government Loans Crowd Out Private Borrowing?

This project will study the effectiveness of the Small Business Administration’s (SBA) Disaster Loan Program, a program which has provided low-cost loans to individuals and businesses that have experienced a Federally-verified disaster, such as a hurricane, tornado, or earthquake. It will analyze the impact these loans have had on these recipients, and on the private market and examine whether Federally-provided credit is well-targeted to borrowers who otherwise would not be able to access credit during a time of acute hardship. The project would also speak to the tradeoff between the public and private provision of credit. If the private market is providing less credit following disasters than was previously believed, the program might improve its loan terms with less concern that it is crowding out private lending. Finally, the project would inform federal disaster relief hardship design, which combines insurance and credit programs to offset the sudden and unexpected costs of natural disasters.