Credit Standards and Segregation

Amine Ouazad; Romain Rancière

doi:10.1162/rest_a_00596

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Credit Standards and Segregation

Amine Ouazad¹; Romain Rancière^2,3

¹ École Polytechnique · ² University of Southern California · ³ California Southern University

The Review of Economics and Statistics 2016

This paper explores the effects of changes in lending standards on racial segregation within metropolitan areas. Such changes affect neighborhood choices as well as aggregate prices and quantities in the housing market. Using the credit boom of 2000 to 2006 as a large-scale experiment, we put forward an IV strategy that predicts the relaxation of credit standards as the result of a credit supply shock predominantly affecting liquidity-constrained banks. The relaxed lending standards led to significant outflows of whites from black and racially mixed neighborhoods. Without such a credit supply shock, black households would have had between 2.3 and 5.1 percentage points more white neighbors in 2010.

DOI: 10.1162/rest_a_00596
Volume: 98 (5)
Pages: 880-896
Language: en
Export: BibTeX
Sources: openalex crossref