Dobbie, Will, Liberman, Andres, Paravisini, Daniel ORCID: 0009-0006-8803-8442 and Pathania, Vikram S. (2021) Measuring bias in consumer lending. Review of Economic Studies, 88 (6). 2799 - 2832. ISSN 0034-6527
Text (Paravisini_measuring-bias-in-consumer-lending--published)
- Published Version
Available under License Creative Commons Attribution. Download (722kB) |
Abstract
This article tests for bias in consumer lending using administrative data from a high-cost lender in the U.K. We motivate our analysis using a new principal-agent model of bias where loan examiners are incentivized to maximize a short-term outcome, not long-term profits, leading to bias against illiquid applicants at the margin of loan decisions. We identify the profitability of marginal applicants using the quasi-random assignment of loan examiners, finding significant bias against immigrant and older applicants when using the firm’s preferred measure of long-run profits but not when using the short-run measure used to evaluate examiner performance. In this case, market incentives based on characteristics that vary across groups lead to inefficient group-based bias.
Item Type: | Article |
---|---|
Official URL: | https://academic.oup.com/restud |
Additional Information: | © 2021 The Authors |
Divisions: | Finance |
Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory H Social Sciences > HT Communities. Classes. Races |
JEL classification: | J - Labor and Demographic Economics > J1 - Demographic Economics > J15 - Economics of Minorities and Races; Non-labor Discrimination J - Labor and Demographic Economics > J1 - Demographic Economics > J16 - Economics of Gender; Non-labor Discrimination |
Date Deposited: | 04 Jun 2020 16:24 |
Last Modified: | 11 Oct 2024 19:15 |
URI: | http://eprints.lse.ac.uk/id/eprint/104984 |
Actions (login required)
View Item |