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Branch location choice: Do lenders discriminate?

Author

Listed:
  • 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).

Suggested Citation

  • AKM Rezaul Hossain, 2010. "Branch location choice: Do lenders discriminate?," Economía, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, vol. 35(30), pages 11-55, july-dece.
  • Handle: RePEc:ula:econom:v:35:y:2010:i:30:p:11-55
    as

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    File URL: ftp://iies.faces.ula.ve/Pdf/Revista30/Rev30Hossain.pdf
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    References listed on IDEAS

    as
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    4. Elizabeth K. Kiser, 2002. "Household switching behavior at depository institutions: evidence from survey data," Finance and Economics Discussion Series 2002-44, Board of Governors of the Federal Reserve System (U.S.).
    5. John P. Caskey, 1992. "Bank representation in low-income and minority urban communities," Research Working Paper 92-10, Federal Reserve Bank of Kansas City.
    6. Raphael W. Bostic & Breck L. Robinson, 2003. "Do CRA Agreements Influence Lending Patterns?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(1), pages 23-51, March.
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    8. John P. Caskey, 1991. "Check-cashing outlets in the U.S. financial system," Economic Review, Federal Reserve Bank of Kansas City, vol. 76(Nov), pages 53-67.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Branch location choice; neighborhood effects; lender heterogeneity; disparate treatment and disparate impact of branch location choice.;
    All these keywords.

    JEL classification:

    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • G2 - Financial Economics - - Financial Institutions and Services
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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