Rural Economic Development in the United States

Abstract

The U.S. Department of Agriculture's Business and Industry (B&I) Guaranteed Loan Program guarantees loans made by rural banks to rural businesses. The author evaluates B&I's effectiveness in increasing employment using basic ordinary least squares (OLS) and propensity score matching models. The author finds a robust association between loan reception and increased employment growth. A loan of $1,000 per capita is accompanied by a 3% to 6% increase in employment-per-capita growth and a 3% to 5% decrease in earnings-per-worker growth over the 2 years after the loan, leaving the effect on total county earnings indeterminate. The author concludes that the B&I loan program subsidizes loans associated with increased employment growth, although the jobs created are lower paying than average.

Keywords

USDA program evaluation rural economic development guaranteed loans

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