Impacts of community reinvestment act designation on employment in the presence of spatial spillovers

Abstract This study investigates the impact of the Community Reinvestment Act (CRA) designation on the resident employment-to-population ratio in the USA from 2012 to 2019, using synthetic difference-in-differences method. It also examines how these effects differ among underserved populations and between metropolitan, micropolitan, and small towns and rural areas. The CRA works through regulatory incentives that encourage private banks—not direct public investment—to increase lending to small businesses in designated low- and moderate-income census tracts, thereby facilitating job creation for local residents. Findings reveal positive overall employment effects in all CRA-designated tracts. In metropolitan tracts, the CRA led to higher employment-to-population ratio for all residents including White, Black, and female, but not for Hispanic residents. The results vary by geographic area: metropolitan tracts show the strongest effects, micropolitan tracts demonstrate similar but smaller patterns, while small towns and rural tracts show no statistically significant changes. The study finds that the CRA had spatial spillover effects, meaning that the program benefited tracts located near the designated areas, even if they were not officially part of the program. These spillovers decline with distance between control and treated tracts.