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Credit Standards and Segregation

Author

Listed:
  • Amine Ouazad

    (Ecole Polytechnique)

  • Romain Rancière

    (University of Southern California)

Abstract

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.

Suggested Citation

  • Amine Ouazad & Romain Rancière, 2016. "Credit Standards and Segregation," The Review of Economics and Statistics, MIT Press, vol. 98(5), pages 880-896, December.
    • Handle: RePEc:tpr:restat:v:98:y:2016:i:5:p:880-896
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    1. Francis Kramarz & Stephen Machin & Amine Ouazad, 2008. "What Makes a Test Score ? The Respective Contributions of Pupils, Schools and Peers in Achievement in English Primary Education," Working Papers 2008-21, Center for Research in Economics and Statistics.
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    7. Giovanni Dell’ariccia & Deniz Igan & Luc Laeven, 2012. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 367-384, March.
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    Citations

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    Cited by:

    1. Loayza,Norman V. & Ouazad,Amine & Ranciere,Romain, 2017. "Financial development, growth, and crisis: is there a trade-off ?," Policy Research Working Paper Series 8237, The World Bank.
    2. Amine Ouazad & Romain Rancière, 2019. "City Equilibrium With Borrowing Constraints: Structural Estimation And General Equilibrium Effects," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(2), pages 721-749, May.
    3. Rancière, Romain & Ouazad, Amine, 2015. "Structural Demand Estimation with Borrowing Constraints," CEPR Discussion Papers 10866, C.E.P.R. Discussion Papers.
    4. Amine Ouazad, 2020. "Resilient Urban Housing Markets: Shocks vs. Fundamentals," Papers 2010.00413, arXiv.org, revised Oct 2020.
    5. Ihlanfeldt, Keith & Mayock, Tom, 2018. "School segregation and the foreclosure crisis," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 277-290.
    6. Florent Dubois, 2017. "The Sources of Segregation," Working Papers halshs-01524506, HAL.
    7. Rémi Bazillier & Jérôme Héricourt & Samuel Ligonnière, 2017. "Structure of Income Inequality and Household Leverage: Theory and Cross-Country Evidence," Working Papers 2017-01, CEPII research center.
    8. W. Ben McCartney & John Orellana & Calvin Zhang, 2021. "“Sort Selling”: Political Polarization and Residential Choice," Working Papers 21-14, Federal Reserve Bank of Philadelphia.
    9. Murphy, Daniel, 2024. "Housing cycles and gentrification," Journal of Monetary Economics, Elsevier, vol. 144(C).

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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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