Introduction to the Special Issue on Inclusive Economic Development: Paycheck Protection Program

In 2019, the Federal Reserve Bank of Boston, The Initiative for a Competitive Inner City, and the W.E. Upjohn Institute for Employment Research partnered to gain a better understanding of the mechanisms and contexts that promote inclusive economic growth and development. Inclusive economic development policies promote equitable, participatory, and sustainable growth and opportunities for all populations. They are focused on reducing economic, financial, physical, and social barriers facing vulnerable populations. Each institution has a long-standing interest in equitable growth, and the time was right as the economy flourished —there was a tight labor market, and innovation became necessary to attract and retain both businesses and workers. We set out plans to host a themed conference in Boston and produce a related issue in this journal. Before we released a call for papers, however, the Covid-19 pandemic struck and a whole new context emerged: one that underscored the importance of equity as the economy recovers. The August and November issues of Economic Development Quarterly pivot to the current context by thinking about the current environment in at least three important ways: (1) how we determine which places are most in need of economic development approaches, (2) what new ways of initiating economic development may be fruitful, and (3) how government efforts aligned with equitable economic development during the pandemic. As the economy continues its recovery from the pandemic, it is important to reflect on what the pandemic revealed about existing inequities in regional economies. The August and November special issues examine both the pre-pandemic conditions facing underserved populations and the impact of pandemic-related public policies on economic inclusiveness. This issue explores the impact of the Paycheck Protection Program (PPP), which was the largest economic development initiative since the Great Depression. Overall, the papers in this issue suggest that many policy-influenced disparities of the past were initially carried through to the pandemic. However, at the same time, they highlight deliberate alterations to the PPP in its final round that improved inclusivity. Congress authorized the PPP during the early stages of the pandemic as business activity fell precipitously. All told, the program disbursed nearly $800 billion to nearly 9 million businesses across three rounds of funding between April 2020 and April 2021 (Lester & Wilson, 2023). Congress intended for the program to provide emergency economic relief to small businesses and help them keep employees on their payroll by offering forgivable loans administered by the Small Business Administration (SBA). The issue of inclusiveness became immediately relevant because the pandemic-induced recession led to disparities, with disproportionate negative impacts on minorityand female-owned businesses. Business activity in the first few months of the pandemic fell 41% among Blacks and 32% among Latinx, compared with 17% among Whites (Fairlie, 2020). Female-owned firms also declined by 25%, compared to a 20% drop for male-owned firms (Fairlie). However, early assessments of the PPP showed it, too, led to disparities. Funds flowed predominantly to majority White areas and some evidence of discrimination surfaced. A matched-pair audit test of financial institutions showed disparities between bank representatives’ encouragement of Black and White testers in both applying for a PPP loan and the products and information offered by bank representatives (Lederer et al., 2020). Phases 1 and 2 of the PPP were larger in terms of number of loans made (5.1 million vs. 3.7 million), but even more so in total amount lent, with $517 billion in phases 1 and 2 and