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Now You See It, Now You Don't: Why Do Real Estate Agents Withhold Available Houses from Black Customers?

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Author Info
Jan Ondrich () (Center for Policy Research, Maxwell School, Syracuse University)
Stephen Ross
John Yinger () (Center for Policy Research, Maxwell School, Syracuse University)

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Abstract

This paper develops a new approach to testing hypotheses about the causes of discrimination in housing sales. We follow previous research by using data from fair housing audits, a matched-pair technique for comparing the traetment of equally qualified black and white home buyers. Our contribution is to shift the focus from differences in the treatment of teammates during an audit to agent decisions concerning an individual housing unit. Our sample consists of all units seen by either a black of a white auditor in the 1989 national Housing Discrimination Study. We estimate a multinomial logit model to explain a real estate agent's joint decisions concerning whether to show each unit to a white auditor and to a black auditor. We find evidence that real estate agents make and act upon inferences about a customer's preferences on the basis of the customer's initial inequity and that agents practice redlining, defined as the withholding of units in integrated neighborhoods. We find little evidence to support the conclusion that agents discriminate because of their own prejudice, but some evidence that they discriminate because of the prejudice of their white customes. More importantly, we find strong evidence of statistical discrimination; agents withhold houses from blacks when the probability of a successful transaction is perceived to be low.

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File URL: http://www-cpr.maxwell.syr.edu/cprwps/pdf/wp24.pdf
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Paper provided by Center for Policy Research, Maxwell School, Syracuse University in its series Center for Policy Research Working Papers with number 24.

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Length: 35 pages
Date of creation: May 2000
Date of revision:
Handle: RePEc:max:cprwps:24

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Find related papers by JEL classification:
J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities and Races; Non-labor Discrimination
J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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  1. Roychoudhury, Canopy & Goodman, Allen C., 1992. "An ordered probit model for estimating racial discrimination through fair housing audits," Journal of Housing Economics, Elsevier, vol. 2(4), pages 358-373, December. [Downloadable!] (restricted)
  2. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March. [Downloadable!] (restricted)
  3. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September. [Downloadable!] (restricted)
  4. Yinger, John, 1997. "Cash in Your Face: The Cost of Racial and Ethnic Discrimination in Housing," Journal of Urban Economics, Elsevier, vol. 42(3), pages 339-365, November. [Downloadable!] (restricted)
  5. Canopy Roychoudhury & Allen C. Goodman, 1996. "Evidence of Racial Discrimination in Different Dimensions of Owner-Occupied Housing Search," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(2), pages 161-178. [Downloadable!] (restricted)
  6. Courant, Paul N., 1978. "Racial prejudice in a search model of the urban housing market," Journal of Urban Economics, Elsevier, vol. 5(3), pages 329-345, July. [Downloadable!] (restricted)
  7. George Galster, 1990. "Racial steering by real estate agents: Mechanisms and motives," The Review of Black Political Economy, Springer, vol. 19(1), pages 39-63, June. [Downloadable!] (restricted)
  8. Turner, Margery Austin & Mikelsons, Maris, 1992. "Patterns of racial steering in four metropolitan areas," Journal of Housing Economics, Elsevier, vol. 2(3), pages 199-234, September. [Downloadable!] (restricted)
  9. Kenneth Arrow, 1971. "The Theory of Discrimination," Working Papers 403, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  10. Ondrich, Jan & Ross, Stephen L. & Yinger, John, 2000. "How Common is Housing Discrimination? Improving on Traditional Measures," Journal of Urban Economics, Elsevier, vol. 47(3), pages 470-500, May. [Downloadable!] (restricted)
  11. George Galster, 1990. "Racial steering in urban housing markets: A review of the audit evidence," The Review of Black Political Economy, Springer, vol. 18(3), pages 105-129, December. [Downloadable!] (restricted)
  12. Ladd, Helen F, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Richard K. Green & Donald Bradley & Brian Surette, 2006. "Overcoming the Barriers to Mexican-American Homeownership," Working Papers 0001, School of Business, The George Washington University. [Downloadable!]
  2. Stephen L. Ross, 2008. "Understanding Racial Segregation: What is known about the Effect of Housing Discrimination," Working papers 2008-15, University of Connecticut, Department of Economics, revised Nov 2008. [Downloadable!]
  3. Margery Austin Turner & Stephen L. Ross, 2003. "Housing Discrimination in Metropolitan America: Findings from the Latest National Paired Testing Study," Working papers 2003-08, University of Connecticut, Department of Economics, revised May 2004. [Downloadable!]
  4. Marianne Bertrand & Dolly Chugh & Sendhil Mullainathan, 2005. "Implicit Discrimination," American Economic Review, American Economic Association, vol. 95(2), pages 94-98, May. [Downloadable!]
  5. Stephen L. Ross & George C. Galster, 2005. "Fair Housing Enforcement and Changes in Discrimination between 1989 and 2000: An Exploratory Study," Working papers 2005-16, University of Connecticut, Department of Economics. [Downloadable!]
  6. John M. Clapp & Anupam Nanda & Stephen L. Ross, 2005. "Which School Attributes Matter? The Influence of School District Performance and Demographic Composition on Property Values," Working papers 2005-26, University of Connecticut, Department of Economics, revised Jan 2007. [Downloadable!]
    Other versions:
  7. Bo Zhao & Jan Ondrich & John Yinger, 2005. "Why Do Real Estate Brokers Continue to Discriminate? Evidence from the 2000 Housing Discrimination Study," Center for Policy Research Working Papers 67, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
    Other versions:
  8. Richard K. Green, 2006. "Airports and Economic Development," Working Papers 0002, School of Business, The George Washington University. [Downloadable!]
    Other versions:
  9. 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. [Downloadable!]
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