Credit Card Redlining Revisited

FEDS Working Paper No. 2009-39

50 Pages Posted: 15 Oct 2009

See all articles by Kenneth P. Brevoort

Kenneth P. Brevoort

Board of Governors of the Federal Reserve System

Date Written: September 17, 2009

Abstract

Using a proprietary dataset of credit bureau records, Cohen-Cole (2008) finds that banks set credit limits on revolving accounts based in part on the racial composition of the neighborhood in which each borrower resides. This paper evaluates the evidence presented in that working paper using the same proprietary database of credit bureau records. The replication effort presented in this paper suggests that decisions about how to calculate the variables used in that study may have resulted in the unnecessary exclusion of one-fifth of available observations from the estimation samples and may have increased the size of the reported effect by over 25 percent. Furthermore, this analysis suggests that when a control for neighborhood income is added to the estimations, the results presented as evidence of redlining activities disappear.

Keywords: Credit cards, redlining, racial disparities, discrimination

JEL Classification: J15, G21

Suggested Citation

Brevoort, Kenneth, Credit Card Redlining Revisited (September 17, 2009). FEDS Working Paper No. 2009-39, Available at SSRN: https://ssrn.com/abstract=1488980 or http://dx.doi.org/10.2139/ssrn.1488980

Kenneth Brevoort (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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