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- Title
Evidence of Discrimination in Lending: An Extension.
- Authors
Shaffer, Sherrill
- Abstract
We generalize the model of Ferguson and Peters (1995) to allow for unequal recovery rates in the event of default by majority borrowers versus minority borrowers. This simple extension has two direct implications: (i) a uniform credit policy, as defined by Ferguson and Peters, entails cross-subsidization across groups; and (ii) it is possible for a profit-maximizing (and therefore economically nondiscriminatory) lending policy to generate lower average default rates among minority borrowers than among majority borrowers.
- Subjects
UNITED States; RACE discrimination in consumer credit; RACE discrimination in banking; DEFAULT (Finance); COLLECTING of accounts; PROFIT maximization; PERSONAL loans
- Publication
Journal of Finance (Wiley-Blackwell), 1996, Vol 51, Issue 4, p1551
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1996.tb04080.x