Color, Loan Approval, and Crimes: The Dark Side of Mortgage Market Deregulation
30 Pages Posted: 12 Jul 2021
Date Written: July 11, 2021
This paper documents that racial differences in credit distribution during a general mortgage credit expansion can lead to unintended negative consequences on crime. Exploiting a federal mortgage market deregulation, we find a significant increase in mortgage approval to white borrowers, while the approval rate to black borrowers is unchanged. More importantly, the local housing boom induced by this credit expansion leads to an increase in money-related crime rates of black offenders. The results highlight an unintended adverse consequence of credit expansion on the welfare of the minorities.
Keywords: discrimination; credit expansion; housing price; crime
JEL Classification: G21, G28, D62, J15
Suggested Citation: Suggested Citation