Fisman, Raymond, Paravisini, Daniel and Vig, Vikrant (2012) Cultural proximity and loan outcomes. NBER working papers, 18096. NBER, Cambridge, Massachusetts, USA.
We present evidence that shared codes, religious beliefs, ethnicity-cultural proximity between lenders and borrowers improves the efficiency of credit allocation. We identify in-group preferential treatment using dyadic data on the religion and caste of bank officers and borrowers from a bank in India, and a rotation policy that induces quasi-random matching between officers and borrowers. Cultural proximity increases the intensive and extensive margins of lending, and reduces the collateral rate. Ex post, cultural proximity increases repayment performance, even after the in-group officer is replaced by an out-group one. The results suggest that the information benefits of cultural proximity may outweigh the misallocation costs of taste-based discrimination.
|Item Type:||Monograph (Working Paper)|
|Additional Information:||© 2012 The Authors|
|Library of Congress subject classification:||H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
H Social Sciences > HM Sociology
H Social Sciences > HT Communities. Classes. Races
|Journal of Economic Literature Classification System:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
J - Labor and Demographic Economics > J1 - Demographic Economics > J15 - Economics of Minorities and Races; Non-labor Discrimination
|Sets:||Departments > Finance
Collections > Economists Online
|Date Deposited:||16 Apr 2012 13:18|
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