Race, Redlining, and Automobile Insurance Prices

Journal of Business, Vol. 71 No. 3, July 1998

Posted: 19 Jun 1998

See all articles by Scott E. Harrington

Scott E. Harrington

University of Pennsylvania - Wharton School

Greg Niehaus

University of South Carolina - Darla Moore School of Business

Abstract

Following Becker's (1993) suggestion that tests for discrimination should attempt to infer whether profits differ for products sold to minorities and nonminorities, this article tests the hypothesis that racial discrimination affects market prices of auto insurance in Missouri. Compared with tests for discrimination in lending markets, our results are less susceptible to bias from omitted variables. Controlling for available demographic and coverage-related factors, we do not find that loss ratios at the zip-code level are negatively related to percent minority population. This finding is inconsistent with the hypothesis that racial discrimination increases premiums relative to expected claim costs for minorities.

JEL Classification: G22, J71

Suggested Citation

Harrington, Scott E. and Niehaus, Greg, Race, Redlining, and Automobile Insurance Prices. Journal of Business, Vol. 71 No. 3, July 1998, Available at SSRN: https://ssrn.com/abstract=91088

Scott E. Harrington

University of Pennsylvania - Wharton School ( email )

3641 Locust Walk
Colonial Penn Center
Philadelphia, PA 19104-6358
United States
215-898-9403 (Phone)
215-573-2157 (Fax)

HOME PAGE: http://scottharringtonphd.com/

Greg Niehaus (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

College of Business Administration
Francis M. Hipp Building
Columbia, SC 29208
United States
803-777-7254 (Phone)
803-777-6876 (Fax)

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