Job Market Paper

What would be the optimal commission design for disaster relief funds distribution via Bank channels? How do we design the policy and motivation strategies for transferring government welfare to small businesses? This study delves into this question within the context of the Paycheck Protection Program (PPP), which is aimed at assisting small businesses affected by the COVID-19 pandemic. Using the bunching estimation approach and leveraging the incentive discontinuity in fee schemes, this paper examines SBA PPP loan policies by analyzing loan supply elasticities w.r.t. commissions and loan demand elasticities w.r.t. potential interest rates. I find evidence that expectations of loan forgiveness policies influenced borrowers' actions, while commissions had no discernible impact on lender behavior.