Political Economy Seminar Series: Daniel Gingerich

Verify Now, Save Later? Advance Screening to Mitigate Fraud
(with Shan Aman-Rana & Sandip Sukhtankar)

Advance screening is a common feature of fraud and corruption mitigation efforts around the world. Yet in spite of its potentially important role in maintaining the integrity of public programs, there is a paucity of empirical research on the efficacy of advanced screening. The current paper addresses this lacuna through an assessment of the impact of advance screening in reducing fraud 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 advance screening by exploiting temporal variation in the documentation standards applied to loan applications for loans of different values. We find that advanced screening significantly reduced the incidence and magnitude of two types of loan irregularities that are indicative of fraud. Moreover, our analysis reveals that a subset of borrowers with a checkered history strategically set their loan applications to a low level in order to avoid being subjected to advance screening. All told, the evidence indicates that advance screening led to a reduction in losses due to fraud.

The Political Economy Seminar series meets most Wednesdays at noon. Please click on the "more information" button below for the full schedule.