Journal of Political Economy Vol. 128 No. 9 2020
Experience of Communal Conflicts and Intergroup Lending
Abstract
We provide microeconomic evidence on ethnic frictions and market efficiency, using dyadic data on managers and borrowers from a large Indian bank. We conjecture that, if exposure to religion-based communal violence intensifies intergroup animosity, riot exposure will lead to lending decisions that are more sensitive to a borrower’s religion. We find that riot-exposed Hindu branch managers lend relatively less to Muslim borrowers and that these loans are less likely to default, consistent with riot exposure exacerbating taste-based discrimination. This bias is persistent across a bank officer’s tenure, suggesting that the economic costs of ethnic conflict are long-lasting, potentially spanning across generations.
- DOI
- 10.1086/708856
- Volume
- 128
- Issue
- 9
- Pages
- 3346-3375
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref