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Branch location choice: Do lenders discriminate?

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Author Info

  • AKM Rezaul Hossain

    ()
    (Division of Business, Mont Saint Mary College (MSMC), Newburgh, New York.)

Abstract

This paper examines the factors that affect branch location choice of depository lenders. Consistent with previous studies, the tract level analysis in this paper finds a strong negative impact of neighborhood income and minority composition on individual access to depository branches even after controlling for neighborhood unobservables. In the lender level analysis the negative impact of income and race does not persist once neighborhood fixed effects are included. This raises an important incongruity between individual (lender) and aggregate (tract) level analysis. The paper suggests that this inconsistency is related to the logic of disparate treatment and disparate impact by showing how a neighborhood with low income and high minority composition may end up with fewer branches (a disparate impact) even when no individual lender makes branch location choice based on income or race (no disparate treatment).

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File URL: ftp://iies.faces.ula.ve/Pdf/Revista30/Rev30Hossain.pdf
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Bibliographic Info

Article provided by Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela in its journal Economía.

Volume (Year): 35 (2010)
Issue (Month): 30 (July-December)
Pages: 11-55

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Handle: RePEc:ula:econom:v:35:y:2010:i:30:p:11-55

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Postal: Facultad de Ciencias Económicas y Sociales. Instituto de Investigaciones Económicas y Sociales. Campus Universitario Liria, Edificio G, Tercer Nivel. Mérida 5101, Estado Mérida, Venezuela
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Web page: http://iies.faces.ula.ve/
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Related research

Keywords: Branch location choice; neighborhood effects; lender heterogeneity; disparate treatment and disparate impact of branch location choice.;

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References

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  1. Drew Dahl & Douglas D. Evanoff & Michael F. Spivey, 2000. "Does the Community Reinvestment Act influence lending? an analysis of changes in bank low-income mortgage activity," Working Paper Series WP-00-6, Federal Reserve Bank of Chicago.
  2. Xiaoming Li & AKM Rezaul Hossain & Stephen L. Ross, 2010. "Neighborhood Information Externalities and the Provision of Mortgage Credit," Working papers 2010-10, University of Connecticut, Department of Economics.
  3. Felici Roberto & Pagnini Marcello, 2005. "Distance, bank heterogeneity and entry in local banking markets," Temi di discussione (Economic working papers) 557, Bank of Italy, Economic Research and International Relations Area.
  4. Stephen L. Ross & John Yinger, 2002. "The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182289, December.
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