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Friday Seminar - "Explaining Racial Disparities in Personal Bankruptcy Outcomes" - Ben Iverson (BYU)

Ben Iverson, Associate Professor at Brigham Young University, will present his research at SSE main building (Room A720) on Friday, March 1 at 10:30 CET.

"Explaining Racial Disparities in Personal Bankruptcy Outcomes"

Abstract: We document substantial racial disparities in consumer bankruptcy outcomes and investigate the role of racial bias in contributing to these disparities. Using data on the near universe of US bankruptcy cases and a deep-learning imputed measures of race, we show that Black filers are 16 and 3 percentage points (pp) more likely to have their bankruptcy cases dismissed without any debt relief in Chapters 13 and 7, respectively. We uncover strong evidence of racial homophily in Chapter 13: Black filers are 7 pp more likely to be dismissed when randomly assigned to a White bankruptcy trustee. To interpret our findings, we develop a general decision model and new identification results relating homophily to bias. Our homophily approach is particularly useful in settings where traditional outcomes tests for bias are not feasible because the decision-maker’s objective is not well defined or the decision-relevant outcome is unobserved. Using this framework and our homophily estimate, we conclude that at least 37% of the 16 pp dismissal gap is due to either taste-based or inaccurate statistical racial discrimination.

Read the paper

Dept. of Finance Finance Brown bag