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Working Paper
How Much Does Racial Bias Affect Mortgage Lending? Evidence from Human and Algorithmic Credit Decisions
We assess racial discrimination in mortgage approvals using confidential data on mortgage applications. Minority applicants tend to have significantly lower credit scores, higher leverage, and are less likely than White applicants to receive algorithmic approval from raceblind government-automated underwriting systems (AUS). Observable applicant-risk factors explain most of the racial disparities in lender denials. Further, we exploit the AUS data to show there are risk factors we do not directly observe, and our analysis indicates that these factors explain at least some of the residual 1-2 ...
Periodic Essay
Reflections from Loretta J. Mester
I struggled with whether or not I should send out a message after the Atlanta attack. On the one hand, I believe such a heinous act requires condemnation and a public statement that I, and the institution I lead, are committed to championing diversity, equity, inclusion, and economic opportunity. It would be wrong to just look away. On the other hand, reacting only by going on record as being against atrocious acts like this feels too much like resigned acceptance that this is the way things are. Social responsibility requires us to act. The hard question is what can be done to reduce the ...
Journal Article
Age Discrimination and Age Stereotypes in Job Ads
Studies suggest that employers discriminate against older workers in hiring, responding less favorably to equally qualified job applicants who are older. Employers may also limit hiring of older workers by including age stereotypes in job ads that signal a preference for younger workers. Evidence from an experimental study shows that older workers are less likely to apply to job advertisements that contain language with ageist stereotypes. The results indicate that this impact is comparable to the direct effects of employer age discrimination in hiring decisions.
Working Paper
Does Differential Treatment Translate to Differential Outcomes for Minority Borrowers? Evidence from Matching a Field Experiment to Loan-Level Data
This paper provides evidence on the relationship between differential treatment of minority borrowers and their mortgage market outcomes. Using data from a field experiment that identifies differential treatment matched to real borrower transactions in the Home Mortgage Disclosure Act (HMDA) data, we estimate difference-in-difference models between African American and white borrowers across lending institutions that display varying degrees of differential treatment. Our results show that African Americans are more likely to be in a high-cost (subprime) loan when borrowing from lenders that ...
Report
Applications or Approvals: What Drives Racial Disparities in the Paycheck Protection Program?
We use the 2020 Small Business Credit Survey to study the sources of racial disparities in use of the Paycheck Protection Program (PPP). Black-owned firms are 8.9 percentage points less likely than observably similar white-owned firms to receive PPP loans. About 55 percent of this take-up disparity is attributable to a disparity in application propensity, while the remainder is attributable to a disparity in approval rates. The finding in prior research that Black-owned PPP recipients are less likely than white-owned recipients to borrow from banks and more likely to borrow from fintech ...
Discussion Paper
What Drove Racial Disparities in the Paycheck Protection Program?
Numerous studies of the Paycheck Protection Program (PPP), which provided loans to small businesses during the COVID-19 pandemic, have documented racial disparities in the program. Because publicly available PPP data only include information on approved loans, prior work has largely been unable to assess whether these disparities were driven by borrower application behavior or by lender approval decisions. In this post, which is based on a related Staff Report and NBER working paper, we use the Federal Reserve’s 2020 Small Business Credit Survey to examine PPP application behavior and ...
Working Paper
The supply side of discrimination: evidence from the labor supply of Boston taxi drivers
This paper investigates supply-side discrimination in the labor market for Boston taxi drivers. Using data on millions of trips from 2010?2015, I explore whether the labor supply behavior of taxi drivers differs by the gender, racial/ethnic, or age composition of Boston neighborhoods. I find that disparities in shift hours due to neighborhood demographics exist even when differences in local earnings opportunities are taken into account. I observe heterogeneity in the amount that drivers discriminate and find that this discrimination is primarily statistical rather than taste-based. As ...
Working Paper
Can Landlords Be Paid to Stop Avoiding Voucher Tenants?
Despite being eligible for use in any neighborhood, housing choice vouchers tend to be redeemed in low-opportunity neighborhoods. This paper investigates whether landlord behavior contributes to this outcome by studying the recent expansion of neighborhood-based voucher limits in Washington, DC. We conduct two waves of a correspondence experiment: one before and one after the expansion. Landlords heavily penalize tenants who indicate a desire to pay by voucher. The voucher penalty is larger in high-rent neighborhoods, pushing voucher tenants to low-rent neighborhoods. We find no evidence that ...
Working Paper
Basic Facts on the Coverage of the Paycheck Protection Program
This paper applies loan-level information from Paycheck Protection Program loans to analyze the coverage of this extraordinary lending program. We show that loans went to a large share of small businesses across most industries in the US, especially to industries that were most negatively impacted by COVID-19 stay-at-home orders. We geocode the loans and then identify that 2021 loans were more concentrated in low- and moderate-income communities, along with census tracts where minority residents are a majority of the population. The growth of nonemployer loans and fintech lending in the ...