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Is Lending Discrimination Always Costly?

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  • Ferguson, Michael F
  • Peters, Stephen R

Abstract

How can economically costly discrimination persist in a competitive market? Previous research into this question has focused on market imperfections which prevent competitive forces from eliminating the economically costly behavior. In this paper we show that lending discrimination is not always costly (to the lender). This has two important implications. First, lending discrimination may persist indefinitely, even in a competitive market. Second, tests for lending discrimination based on profits (or default rates) may be unable to detect discrimination when it exists. Copyright 2000 by Kluwer Academic Publishers

Suggested Citation

  • Ferguson, Michael F & Peters, Stephen R, 2000. "Is Lending Discrimination Always Costly?," The Journal of Real Estate Finance and Economics, Springer, vol. 21(1), pages 23-44, July.
    • Handle: RePEc:kap:jrefec:v:21:y:2000:i:1:p:23-44
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    1. repec:max:cprpbr:24 is not listed on IDEAS
    2. Moro, Andrea & Wisniewski, Tomasz Piotr & Mantovani, Guido Massimiliano, 2017. "Does a manager's gender matter when accessing credit? Evidence from European data," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 119-134.
    3. Radeef Chundakkadan & Subash Sasidharan, 2022. "Gender gap and access to finance: A cross‐country analysis," Review of Development Economics, Wiley Blackwell, vol. 26(1), pages 180-207, February.
    4. Blanchard, Lloyd & Zhao, Bo & Yinger, John, 2008. "Do lenders discriminate against minority and woman entrepreneurs?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 467-497, March.
    5. Lloyd Blanchard & Bo Zhao & John Yinger, 2005. "Do Credit Market Barriers Exist for Minority and Women Entrepreneurs?," Center for Policy Research Working Papers 74, Center for Policy Research, Maxwell School, Syracuse University.
    6. Song Han, 2004. "Discrimination in Lending: Theory and Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 29(1), pages 5-46, July.
    7. David Nickerson, 2022. "Credit Risk, Regulatory Costs and Lending Discrimination in Efficient Residential Mortgage Markets," JRFM, MDPI, vol. 15(5), pages 1-17, April.
    8. Anastasia Cozarenco & Ariane Szafarz, 2024. "How to identify lending bias when the lender's goal is not profit?," Working Papers CEB 24-007, ULB -- Universite Libre de Bruxelles.
    9. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 1-27, October.

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