As part of the series of the "Finance Research Seminar", VGSF welcomes Daniel Paravisini from the London School of Economics to present his research paper.
At short notice the seminar has to be rescheduled. It will take place via Teams from 10:00 am to 11:00 am!
Measuring Bias in Consumer Lending
This paper tests for bias in consumer lending using administrative data from a high-cost lender in the United Kingdom. We motivate our analysis using a new principal-agent model of bias where loan examiners maximize a short-term outcome, not long-term profits, leading to bias against illiquid applicants at the margin of loan decisions. We identify the profitability of marginal applicants using the quasi-random assignment of loan examiners. Consistent with our model, we find significant bias against immigrant and older applicants when using the firm's preferred measure of long-run profits, but not when using the short-run measure used to evaluate examiner performance.