Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud / Shan Aman-Rana, Daniel W. Gingerich, Sandip Sukhtankar.

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Aman-Rana, Shan

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w31364.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Screening requirements are common features of fraud and corruption mitigation efforts around the world. Yet imposing these requirements involves trade-offs between higher administrative costs, delayed benefits, and exclusion of genuine beneficiaries on one hand and lower fraud on the other. We examine these trade-offs in one of the largest economic relief programs in US history: the Paycheck Protection Program (PPP). Employing a database that includes nearly 11.5 million PPP loans, we assess the impact of screening by exploiting temporal variation in the documentation standards applied to loan applications for loans of different values. We find that screening significantly reduced the incidence and magnitude of various measures of loan irregularities that are indicative of fraud. Moreover, our analysis reveals that a subset of borrowers with a checkered history strategically reduced their loan application amounts in order to avoid being subjected to screening. Borrowers without a checkered history engaged in this behavior at a much lower rate, implying that the documentation requirement reduced fraud without imposing an undue administrative burden on legitimate firms. All told, our estimates imply that screening led to a reduction in losses due to fraud equal to at least $744 million.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
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Previous	nber w31361 Fatal Errors: The Mortality Value of Accurate Weather Forecasts /	nber w31362 Global Value Chains and Labor Standards: The Race-to-the-Bottom Problem. /	nber w31363 Foreign Direct Investment, Global Value Chains, and Labor Rights: No Race-to-the-Bottom? /	nber w31364 Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud /	nber w31365 The Historical Impact of Coal on Cities /	nber w31366 The Spillover Effects of Top Income Inequality /	nber w31367 Understanding Trends in Chinese Skill Premiums, 2007-2018 /	Next

June 2023.

Screening requirements are common features of fraud and corruption mitigation efforts around the world. Yet imposing these requirements involves trade-offs between higher administrative costs, delayed benefits, and exclusion of genuine beneficiaries on one hand and lower fraud on the other. We examine these trade-offs in one of the largest economic relief programs in US history: the Paycheck Protection Program (PPP). Employing a database that includes nearly 11.5 million PPP loans, we assess the impact of screening by exploiting temporal variation in the documentation standards applied to loan applications for loans of different values. We find that screening significantly reduced the incidence and magnitude of various measures of loan irregularities that are indicative of fraud. Moreover, our analysis reveals that a subset of borrowers with a checkered history strategically reduced their loan application amounts in order to avoid being subjected to screening. Borrowers without a checkered history engaged in this behavior at a much lower rate, implying that the documentation requirement reduced fraud without imposing an undue administrative burden on legitimate firms. All told, our estimates imply that screening led to a reduction in losses due to fraud equal to at least $744 million.