Political Voice and (Mortgage) Market Participation: Evidence from Minority Disenfranchisement

Abstract

This paper documents the relationship between electoral disenfranchisement and economic decision-making. Using the dilution of Section 5 of the Voting Rights Act as a shock to the enfranchisement of Black Americans, we find a decline in mortgage origination for Black Americans, primarily driven by reduced applications. Additionally, we observe a flight of Black applications to Black lenders, indicating an increase in racial homophily. The findings suggest that disenfranchisement can lead to exclusion from markets and exacerbate racial homeownership gaps. Leveraging individual-level social survey data, we show trust in government and financial institutions plays a significant role in driving these effects.

JEL Classification: D12, D72, G21, G51, J15