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Discriminatory Lending : Evidence from Bankers in the Lab

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  • Brock, J. Michelle
  • de Haas, Ralph

    (Tilburg University, Center For Economic Research)

Abstract

We implement a lab-in-the-field experiment with 334 Turkish loan officers to document gender discrimination in small business lending and to unpack the mechanisms at play. Each officer reviews multiple real-life loan applications in which we randomize the applicant's gender. While unconditional approval rates are the same for male and female applicants, loan officers are 26 percent more likely to require a guarantor when we present the same application as coming from a female instead of a male entrepreneur. A causal forest algorithm to estimate heterogeneous treatment effects reveals that this discrimination is strongly concentrated among young, inexperienced, and gender-biased loan officers. Discrimination mainly affects female loan applicants in male-dominated industries, indicating how financial frictions can perpetuate entrepreneurial gender segregation across sectors.
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  • Brock, J. Michelle & de Haas, Ralph, 2021. "Discriminatory Lending : Evidence from Bankers in the Lab," Discussion Paper 2021-006, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:12af373a-8e1a-46dd-afd4-a5ea21c40b03
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    1. Asuamah Yeboah, Samuel & Mogre, Diana & Nartey Menzo, Benjamin Prince, 2024. "Beyond the Numbers: Social Factors in Credit Risk," MPRA Paper 122363, University Library of Munich, Germany, revised 20 Aug 2024.
    2. Ye Zhang, 2020. "Discrimination in the Venture Capital Industry: Evidence from Field Experiments," Papers 2010.16084, arXiv.org, revised Aug 2022.
    3. Ubfal, Diego, 2024. "What Works in Supporting Women-Led Businesses?," IZA Discussion Papers 16950, Institute of Labor Economics (IZA).
    4. Vojtech Bartos & Silvia Castro & Kristina Czura & Timm Opitz, 2023. "Gendered Access to Finance: The Role of Team Formation, Idea Quality, and Implementation Constraints in Business Evaluations," Rationality and Competition Discussion Paper Series 473, CRC TRR 190 Rationality and Competition.
    5. Chen, S. & Doerr, S. & Frost, J. & Gambacorta, L. & Shin, H.S., 2023. "The fintech gender gap," Journal of Financial Intermediation, Elsevier, vol. 54(C).
    6. Ozili, Peterson K, 2024. "Artificial intelligence and central bank digital currency," MPRA Paper 121567, University Library of Munich, Germany.
    7. Athey, Susan & Karlan, Dean & Palikot, Emil & Yuan, Yuan, 2022. "Smiles in Profiles: Improving Fairness and Efficiency Using Estimates of User Preferences in Online Marketplaces," Research Papers 4071, Stanford University, Graduate School of Business.
    8. Tabea Bucher-Koenen & Andreas Hackethal & Johannes Koenen & Christine Laudenbach, 2021. "Gender Differences in Financial Advice," ECONtribute Discussion Papers Series 095, University of Bonn and University of Cologne, Germany.
    9. Patrick Rehill, 2024. "How do applied researchers use the Causal Forest? A methodological review of a method," Papers 2404.13356, arXiv.org.
    10. Bach, Thang Ngoc & Le, Thanh & Nguyen, Thang Xuan & Hoang, Khanh, 2023. "Gender discrimination, social networks and access to informal finance of Vietnamese small and medium enterprises," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 358-372.
    11. Mark Kattenberg & Bas Scheer & Jurre Thiel, 2023. "Causal forests with fixed effects for treatment effect heterogeneity in difference-in-differences," CPB Discussion Paper 452, CPB Netherlands Bureau for Economic Policy Analysis.
    12. 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.

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    More about this item

    Keywords

    Gender bias; bank credit; implicit association test; lab-in-the-field; causal forest;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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