Banking Infrastructure and the Paycheck Protection Program during the Covid-19 Pandemic

In response to the negative economic impacts of the COVID-19 pandemic, the U.S. government implemented the Paycheck Protection Program (PPP) to preserve employment. Since PPP was channeled through banks, regional characteristics of the banking sector potentially result in uneven program reach. This paper examines how regional variations in market concentration and community banks contribute to PPP loan disbursement. Using the U.S. county-level data, I find that greater market concentration reduces the number of PPP loans per business. This negative effect is mitigated by a greater presence of community banks, but only in a highly concentrated market.