IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v85y2003i4p930-943.html
   My bibliography  Save this article

Discrimination in the Small-Business Credit Market

Author

Listed:
  • David G. Blanchflower

    (Dartmouth College and NBER)

  • Phillip B. Levine

    (Wellesley College and NBER)

  • David J. Zimmerman

    (Williams College)

Abstract

We use data from the 1993 and 1998 National Surveys of Small Business Finances to examine the existence of racial discrimination in the small-business credit market. We conduct an econometric analysis of loan outcomes by race and find that black-owned small businesses are about twice as likely to be denied credit even after controlling for differences in creditworthiness and other factors. A series of specification checks indicates that this gap is unlikely to be explained by omitted variable bias. These results indicate that the racial disparity in credit availability is likely caused by discrimination. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 2003. "Discrimination in the Small-Business Credit Market," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 930-943, November.
    • Handle: RePEc:tpr:restat:v:85:y:2003:i:4:p:930-943
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465303772815835
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February.
    2. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
    3. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    4. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1994. "Entrepreneurial Decisions and Liquidity Constraints," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 334-347, Summer.
    5. Day, Theodore E & Liebowitz, S J, 1998. "Mortgage Lending to Minorities: Where's the Bias?," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 3-28, January.
    6. Cavalluzzo, Ken S & Cavalluzzo, Linda C, 1998. "Market Structure and Discrimination: The Case of Small Businesses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 771-792, November.
    7. Timothy Bates, 1989. "The changing nature of minority business: A comparative analysis of asian, nonminority, and black-owned businesses," The Review of Black Political Economy, Springer;National Economic Association, vol. 18(2), pages 25-42, September.
    8. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
    9. Yezer, Anthony M J & Phillips, Robert F & Trost, Robert P, 1994. "Bias in Estimates of Discrimination and Default in Mortgage Lending: The Effects of Simultaneity and Self-Selection," The Journal of Real Estate Finance and Economics, Springer, vol. 9(3), pages 197-215, November.
    10. Fumio Hayashi, 1985. "The Effect of Liquidity Constraints on Consumption: A Cross-Sectional Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 183-206.
    11. Cathy Cloud & George Galster, 1993. "What do we know about racial discrimination in mortgage markets?," The Review of Black Political Economy, Springer;National Economic Association, vol. 22(1), pages 101-120, September.
    12. James J. Heckman, 1998. "Detecting Discrimination," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 101-116, Spring.
    13. Helen F. Ladd, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring.
    14. Blanchflower, D. & Oswald, A., 1990. "Working Internationally," Papers 371, London School of Economics - Centre for Labour Economics.
    15. Robert W. Fairlie & Bruce D. Meyer, 1996. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 757-793.
    16. Tullio Jappelli, 1990. "Who is Credit Constrained in the U. S. Economy?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(1), pages 219-234.
    17. Lindh, Thomas & Ohlsson, Henry, 1996. "Self-Employment and Windfall Gains: Evidence from the Swedish Lottery," Economic Journal, Royal Economic Society, vol. 106(439), pages 1515-1526, November.
    18. Harrison, Glenn W, 1998. "Mortgage Lending in Boston: A Reconsideration of the Evidence," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 29-38, January.
    19. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    20. Paul W. Bauer & Brian A. Cromwell, 1994. "A Monte Carlo examination of bias tests in mortgage lending," Economic Review, Federal Reserve Bank of Cleveland, vol. 30(Q III), pages 27-40.
    21. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-535, June.
    22. Lynn E. Browne & Geoffrey M. B. Tootell, 1995. "Mortgage lending in Boston: a response to the critics," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 53-78.
    23. Black, Jane & de Meza, David & Jeffreys, David, 1996. "House Price, the Supply of Collateral and the Enterprise Economy," Economic Journal, Royal Economic Society, vol. 106(434), pages 60-75, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert W. Fairlie & Alicia M. Robb, 2008. "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States," MIT Press Books, The MIT Press, edition 1, volume 1, number 026206281x, December.
    2. Boris F. Blumberg & Wilko A. Letterie, 2008. "Business Starters and Credit Rationing," Small Business Economics, Springer, vol. 30(2), pages 187-200, February.
    3. Robert W. Fairlie & Alicia M. Robb, 2007. "Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 25(2), pages 289-323.
    4. Robert W. Fairlie, 2004. "Recent Trends in Ethnic and Racial Business Ownership," Small Business Economics, Springer, vol. 23(3), pages 203-218, October.
    5. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September.
    6. Magnus Lofstrom & Chunbei Wang, 2007. "Mexican-Hispanic Self-Employment Entry: The Role of Business Start-Up Constraints," The ANNALS of the American Academy of Political and Social Science, , vol. 613(1), pages 32-46, September.
    7. Letterie, W.A. & Blumberg, B.F., 2002. "Which business starters experience limited access to bank funds?," Research Memorandum 030, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    8. Blanchflower, David G. & Shadforth, Chris, 2007. "Entrepreneurship in the UK," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 3(4), pages 257-364, July.
    9. Harding, John P. & Rosenthal, Stuart S., 2017. "Homeownership, housing capital gains and self-employment," Journal of Urban Economics, Elsevier, vol. 99(C), pages 120-135.
    10. Fairlie, Robert W, 1999. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 80-108, January.
    11. Fairlie, Robert W. & Lofstrom, Magnus, 2013. "Immigration and Entrepreneurship," IZA Discussion Papers 7669, Institute of Labor Economics (IZA).
    12. Robert W. Fairlie, 2002. "Drug Dealing and Legitimate Self-Employment," Journal of Labor Economics, University of Chicago Press, vol. 20(3), pages 538-567, July.
    13. Robert W. Fairlie & Bruce D. Meyer, "undated". "Trends in Self-Employment Among White and Black Men: 1910 - 1990," IPR working papers 99-1, Institute for Policy Resarch at Northwestern University.
    14. Taylor, Mark P, 1999. "Survival of the Fittest? An Analysis of Self-Employment Duration in Britain," Economic Journal, Royal Economic Society, vol. 109(454), pages 140-155, March.
    15. Muravyev, Alexander & Talavera, Oleksandr & Schäfer, Dorothea, 2009. "Entrepreneurs' gender and financial constraints: Evidence from international data," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 270-286, June.
    16. Lofstrom, Magnus & Wang, Chunbei, 2006. "Hispanic Self-Employment: A Dynamic Analysis of Business Ownership," IZA Discussion Papers 2101, Institute of Labor Economics (IZA).
    17. Magnus Lofstrom, 2013. "Does self-employment increase the economic well-being of low-skilled workers?," Small Business Economics, Springer, vol. 40(4), pages 933-952, May.
    18. Colombo, Massimo G. & Delmastro, Marco & Grilli, Luca, 2004. "Entrepreneurs' human capital and the start-up size of new technology-based firms," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1183-1211, November.
    19. Yannis Georgellis & Howard Wall, 2005. "Gender differences in self-employment," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(3), pages 321-342.
    20. Marcén, Miriam, 2013. "The effect of culture on self-employment," MPRA Paper 47338, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:85:y:2003:i:4:p:930-943. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.