Detecting Discrimination: A Dynamic Perspective

Abstract

The statistical analysis of observational data for fair lending purposes relies on the assumption that, at the firm level, racial discrimination (or the lack thereof) is stable across time. Using data from a mortgage lender during the 1998-2006 period, we examine this crucial assumption for the case of pricing differentials for black applicants in household mortgage lending, effectively evaluating possible dynamics in aggregate discrimination patterns. We offer evidence that these estimated pricing differentials may vary substantially across time.

Keywords: Discrimination, Fair lending, Mortgage pricing, Parameter stability

JEL Classification: C18, C54, G21, J15