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Credit Card Redlining Revisited

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Author Info

  • Kenneth P. Brevoort

    (Board of Governors of the Federal Reserve System)

Abstract

Using a proprietary data set of credit bureau records, Cohen-Cole (2011) finds evidence that lenders are using the racial composition of a borrower's neighborhood to set credit limits on revolving accounts. Using the same credit bureau data, I revisit this work and reach two main findings. First, an undocumented decision in constructing the variables appears to have introduced a distortion that is highly correlated with neighborhood racial composition and appears to increase the size of the reported disparity. Second, when neighborhood income is controlled for, the results presented as evidence of redlining disappear.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00173
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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 93 (2011)
Issue (Month): 2 (May)
Pages: 714-724

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Handle: RePEc:tpr:restat:v:93:y:2011:i:2:p:714-724

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Gathergood John, 2011. "Racial Disparities in Credit Constraints in the Great Recession: Evidence from the UK," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-32, September.
  2. Song Han & Benjamin J. Keys & Geng Li, 2011. "Credit supply to personal bankruptcy filers: evidence from credit card mailings," Finance and Economics Discussion Series 2011-29, Board of Governors of the Federal Reserve System (U.S.).

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