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An Investigation of Sex Discrimination in Commercial Banks' Direct Consumer Lending

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  • Richard L. Peterson
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    Abstract

    This article develops a model of prejudicial discrimination in the credit markets. Data on 30,000 commercial bank consumer loans were used to test the model. No. systematic pattern of prejudicial sex discrimination was found -- even before the Equal Credit Opportunity Act (ECOA) was passed. Instead, banks as a whole behaved as profit maximizers, and made loans on equivalent terms to equally risky customers, regardless of sex. These findings suggest that future regulatory initiatives, such as proposed extensions of ECOA, should be thoroughly scrutinized whenever they impose substantial costs under the assumption that firms are not profit maximizers.

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    Article provided by The RAND Corporation in its journal Bell Journal of Economics.

    Volume (Year): 12 (1981)
    Issue (Month): 2 (Autumn)
    Pages: 547-561

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    Handle: RePEc:rje:bellje:v:12:y:1981:i:autumn:p:547-561
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    Cited by:

    1. Stephen L. Ross, 2003. "What Is Known about Testing for Discrimination: Lessons Learned by Comparing across Different Markets," Working papers 2003-21, University of Connecticut, Department of Economics, revised Nov 2003.
    2. Raphael Bostic, 2003. "A Test of Cultural Affinity in Home Mortgage Lending," Journal of Financial Services Research, Springer, vol. 23(2), pages 89-112, April.
    3. Yuliya Demyanyk, 2006. "U.S. banking deregulation and self-employment: a differential impact on those in need," Supervisory Policy Analysis Working Papers 2006-01, Federal Reserve Bank of St. Louis.
    4. Daniele Coin, 2013. "Are female entrepreneurs better payers than men?," Questioni di Economia e Finanza (Occasional Papers) 186, Bank of Italy, Economic Research and International Relations Area.
    5. Lawrence, Edward C., 1997. "The viability of minority-owned banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(1), pages 1-21.
    6. Demirguc-Kunt, Asli & Klapper, Leora & Randall, Douglas, 2013. "Islamic finance and financial inclusion: measuring use of and demand for formal financial services among Muslim adults," Policy Research Working Paper Series 6642, The World Bank.
    7. Song Han, 2002. "On the economics of discrimination in credit markets," Finance and Economics Discussion Series 2002-2, Board of Governors of the Federal Reserve System (U.S.).
    8. Ken Cavalluzzo & Linda Cavalluzzo & John Wolken, 1999. "Competition, small business financing, and discrimination: evidence from a new survey," Finance and Economics Discussion Series 1999-25, Board of Governors of the Federal Reserve System (U.S.).
    9. Clifford B. Hawley & Edwin T. Fujii, 1991. "Discrimination in Consumer Credit Markets," Eastern Economic Journal, Eastern Economic Association, vol. 17(1), pages 21-30, Jan-Mar.
    10. Raphael Bostic, 2002. "A Test of Cultural Affinity in Home Mortgage Lending," Working Paper 8624, USC Lusk Center for Real Estate.
    11. James H. Gilkeson & Drew B. Winters & Peggy D. Dwyer, 2003. "How banks can self-monitor their lending to comply with the equal credit opportunity act," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 7-22.

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