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Cultural Proximity and Loan Outcomes

Author Info

Listed author(s):
  • Raymond Fisman

    ()

  • Daniel Paravisini

    ()

  • Vikrant Vig

    ()

Abstract

Evidence is presented to show that shared codes, religious beliefs, ethnicity - cultural proximity - between lenders and borrowers improves the efficiency of credit allocation. In-group preferential treatment is identified using dyadic data on the religion and caste of bank officers and borrowers from a bank in India, and a rotation policy that induces exogenous matching between officers and borrowers. Cultural proximity increases lending on both intensive and extensive margins and improves repayment performance, even after the in-group officer is replaced by an out-group one. Further, cultural proximity increases loan dispersion and reduces loan to collateral ratios. [BREAD Working Paper No. 345]. URL:[http://ipl.econ.duke.edu/bread/papers/working/345.pdf]

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Paper provided by eSocialSciences in its series Working Papers with number id:5036.

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Date of creation: Jul 2012
Handle: RePEc:ess:wpaper:id:5036
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Keywords: India; Caste; Religion; Lending discrimination; finance; religious beliefs; ethnicity; cultural proximity; lenders; borrowers; bank; credit allocation; financial constraints; loan;

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Find related papers by JEL classification:
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
  • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
  • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
  • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
  • Z12 - Other Special Topics - - Cultural Economics - - - Religion
  • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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Cited by:

  1. Ejaz Ghani & William R. Kerr & Christopher Stanton, 2014. "Diasporas and Outsourcing: Evidence from oDesk and India," Management Science, INFORMS, vol. 60(7), pages 1677-1697, July.
  2. Thorsten Beck & Patrick Behr & Andreas Madestam, 2011. "Sex and Credit: Is There a Gender Bias in Lending?," Working Papers 411, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Giampaolo Lecce & Laura Ogliari, 2015. "Institutional Transplant and Cultural Proximity: Evidence from Nineteenth-Century Prussia," CESifo Working Paper Series 5652, CESifo Group Munich.
  4. Jonas Hjort, 2013. "Ethnic Divisions and Production in Firms," CESifo Working Paper Series 4449, CESifo Group Munich.
  5. Baghai, Ramin & Becker, Bo, 2016. "Non-rating revenue and conflicts of interest," CEPR Discussion Papers 11508, C.E.P.R. Discussion Papers.
  6. Jaspersen, Stefan & Limbach, Peter, 2017. "Knowing Me, Knowing You? Similarity to the CEO and Fund Managers’ Investment Decisions," CFR Working Papers 17-02, University of Cologne, Centre for Financial Research (CFR).
  7. Brogaard, Jonathan & Engelberg, Joseph & Parsons, Christopher A., 2014. "Networks and productivity: Causal evidence from editor rotations," Journal of Financial Economics, Elsevier, vol. 111(1), pages 251-270.
  8. Giampaolo Lecce & Laura Ogliari & Tommaso Orlando, 2017. "Resistance to Institutions and Cultural Distance: Brigandage in Post-Unification Italy," Cowles Foundation Discussion Papers 2097, Cowles Foundation for Research in Economics, Yale University.
  9. repec:hal:wpaper:halshs-01349350 is not listed on IDEAS
  10. Gomes, Joseph, 2014. "The health costs of ethnic distance: evidence from Sub-Saharan Africa," ISER Working Paper Series 2014-33, Institute for Social and Economic Research.
  11. Danielle Li, 2017. "Expertise versus Bias in Evaluation: Evidence from the NIH," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 60-92, April.
  12. Zhong Chunping & Pan Li & Shu Lingwei, 2016. "Do religious beliefs affect borrowing behavior? Evidence from Chinese households," Review of Economics of the Household, Springer, vol. 14(4), pages 989-1005, December.
  13. Eliasson, Tove, 2014. "Immigrant entrepreneurship and the origin of bankers," Working Paper Series 2014:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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