Credit Standards and Segregation

53 Pages Posted: 6 Mar 2011 Last revised: 3 Jul 2013

See all articles by Amine Ouazad

Amine Ouazad

HEC Montréal

Romain G. Rancière

University of Southern California

Multiple version iconThere are 2 versions of this paper

Date Written: July 03, 2013


How do credit standards affect racial segregation? During the latest US mortgage credit boom, metropolitan areas that experienced larger increases in loan-to-income ratios and acceptance rates also experienced smaller declines in Black segregation. Bank liquidity and loan securitizability (measured in 1990-1994) are used to instrument changes in lending standards. The relaxation of credit standards during the credit boom caused Black households to live with between 2 and 8 percentage points more same-race neighbors. The relaxed lending standards led to significant outflows of White households from Black census tracts. Accounting for the foreclosure crisis has no significant effect on our estimates.

Suggested Citation

Ouazad, Amine and Rancière, Romain G., Credit Standards and Segregation (July 03, 2013). INSEAD Working Paper No. 2013/67/EPS. Available at SSRN: or

Amine Ouazad (Contact Author)

HEC Montréal ( email )

3000, ch. de la Côte-Ste-Catherine
Montréal, Quebec H3T 2A7

Romain G. Rancière

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

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