Analysis of natural disasters and COVID-19 pandemic complex impacts on distribution of PPP loans

Abstract

Paycheck protection program (PPP) loans were established during the COVID-19 pandemic to help U.S-based businesses continue paying their employees. PPP loans were meant to help businesses recover from the disruptions caused by the COVID-19 pandemic; however, pre-existing socioeconomic stressors and the impacts of concurrent or previous climate and weather disasters could also amplify the impacts experienced by businesses. The concurrence of these interrupting acute shocks and chronic stressors creates a complex event that can result from combinations of natural, biological, and human-made causes. It is recognized that complex events tend to create an impact that is greater than the sum of their parts. The objective of this study is to evaluate whether the PPP loan allocations are correlated with prior community (i.e., county-level) experience of climate and weather disasters. This analysis seeks to understand whether past experience improves or diminishes the ability of businesses, and the communities in which they function, to respond to disruptive events. The heterogeneity in the correlations is investigated by examining climate and weather disaster occurrence across time, severity of impacts, and county-level characteristics. Our analysis results show a strong association between counties that previously experienced natural hazard events and the first wave of PPP loans from April 3rd to April 16th, 2020; however, the direction of association is different based on the extent of experience. Furthermore, counties that had increased levels of economic risk, including measures of community resilience and relatively greater unemployment rates, received less PPP loan allocations. We believe that the results of this study can potentially be helpful in decision-making regarding the allocation of recovery grants in future and start an important conversation about the structure of support offered to business during and following disaster events.

Christina Gore

Research Economist

I am a research economist in the Applied Economics Office at NIST, working on environmental, behavioral, and community resilience economics.