The Theory of Bank Redlining and Discrimination: An Exploration
- 1 March 1995
- journal article
- Published by SAGE Publications in The Review of Black Political Economy
- Vol. 23 (3) , 37-74
- https://doi.org/10.1007/bf02689991
Abstract
This article addresses a gap in the economic literature on race and credit markets: the theoretical basis of lending discrimination and redlining. It provides a unified model for exploring why discrimination and redlining exist in credit markets. This model is first used to examine three explanations offered by other authors—bigotry, differential risk, and market segmentation. The article then suggests several new explanations of race effects. These emphasize the interlinkage between labor and credit markets; market spillovers due to housing liquidity, refurbishment, and branch location effects; and strategic interaction among lenders.Keywords
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