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Discriminatory Lending: Evidence from Bankers in the Lab

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  • Brock, J Michelle

Abstract

We implement a lab-in-the-field experiment with 334 Turkish loan officers to document gender discrimination in small business lending and to unpack the mechanisms at play. Each officer reviews multiple real-life loan applications in which we randomize the applicant's gender. While unconditional approval rates are the same for male and female applicants, loan officers are 26 percent more likely to require a guarantor when we present the same application as coming from a female instead of a male entrepreneur. A causal forest algorithm to estimate heterogeneous treatment effects reveals that this discrimination is strongly concentrated among young, inexperienced, and gender-biased loan officers. Discrimination mainly affects female loan applicants in male-dominated industries, indicating how financial frictions can perpetuate entrepreneurial gender segregation across sectors.

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  • Brock, J Michelle, 2020. "Discriminatory Lending: Evidence from Bankers in the Lab," CEPR Discussion Papers 14340, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14340
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    Cited by:

    1. Ye Zhang, 2020. "Discrimination in the Venture Capital Industry: Evidence from Field Experiments," Papers 2010.16084, arXiv.org, revised Aug 2022.
    2. Sharon Chen & Sebastian Doerr & Jon Frost & Leonardo Gambacorta & Hyun Song Shin, 2021. "The fintech gender gap," BIS Working Papers 931, Bank for International Settlements.
    3. Susan Athey & Dean Karlan & Emil Palikot & Yuan Yuan, 2022. "Smiles in Profiles: Improving Fairness and Efficiency Using Estimates of User Preferences in Online Marketplaces," Papers 2209.01235, arXiv.org, revised Mar 2023.
    4. Tabea Bucher-Koenen & Andreas Hackethal & Johannes Koenen & Christine Laudenbach, 2021. "Gender Differences in Financial Advice," CRC TR 224 Discussion Paper Series crctr224_2021_273, University of Bonn and University of Mannheim, Germany.

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    More about this item

    Keywords

    Gender bias; Bank credit; Implicit association test; Lab-in-the-field; Causal forest;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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