Dobbie, Will, Liberman, Andres, Paravisini, Daniel and Pathania, Vikram (2021) Measuring bias in consumer lending. Review of Economic Studies, 88 (6). pp. 2799-2832. ISSN 0034-6527
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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 |
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Keywords: | Discrimination, Consumer Credit |
Schools and Departments: | University of Sussex Business School > Economics |
Subjects: | H Social Sciences > HB Economic theory. Demography H Social Sciences > HG Finance > HG0179 Personal finance H Social Sciences > HG Finance > HG3691 Credit. Debt. Loans |
Related URLs: | |
Depositing User: | Vikram Pathania |
Date Deposited: | 21 Aug 2020 10:09 |
Last Modified: | 14 Jan 2022 09:45 |
URI: | http://sro.sussex.ac.uk/id/eprint/93176 |
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