nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2005‒10‒22
two papers chosen by
Steve Ross
University of Connecticut

  1. On the Robustness of Racial Discrimination Findings in Mortgage Lending Studies By Judith A. Clarke; Marsha J. Courchane; Nilanjana Roy
  2. Why Are Similar Workers Paid Differently? The Role of Social Networks By François Fontaine

  1. By: Judith A. Clarke (Department of Economics, University of Victoria); Marsha J. Courchane (ERS Group, Washington D.C.); Nilanjana Roy (Department of Economics, University of Victoria)
    Abstract: The binary logistic regression or logit link model is commonly used to test for racial disparate treatment in fairlending studies undertaken by government agencies, including the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (FRB). Ensuring race neutrality in lending remains a concern of regulators and consumer advocates. Improving the understanding of any shortcomings of either bank internal models or regulatory agency models will enable those participants in the mortgage industry to better serve the needs of consumers. We explore this issue using five bank studies undertaken by the OCC. We consider the impact of the logit link assumption, as this determines how race affects the likelihood of loan approval, by moving to three other links: probit, gompit and complementary log log; the latter two are examples of asymmetric links. As our data sets have been obtained using stratified sampling procedures, which has been typical at the OCC, rather than being drawn via simple random sampling, moving away from the logit link complicates estimation; it is no longer possible to use a standard estimation command with an adjustment for stratum effects. Our results reveal that the choice of link function, despite exhibiting similar sample fit, can influence findings of disparate treatment at the nominal level of significance commonly accepted as the legal standard. We also find that the use of a resampling method, which aims to better approximate the finite sample null distribution, for obtaining p-values typically leads to support for discrimination more often than arises from use of the standard normal approximation.
    Keywords: Logit, Fair lending, Stratified sampling, Binary response, Semi-parametric maximum likelihood, Pseudo log-likelihood, Profile log-likelihood, Without replacement resampling, Bootstrapping
    Date: 2005–10–14
  2. By: François Fontaine (GREMARS, Université Lille 3 and IZA Bonn)
    Abstract: We provide a matching model where identical workers are embedded in ex-ante identical social networks. Job arrival rate is endogenous and wages are bargained. We study the evolution of networks over time and characterize the equilibrium distribution of unemployment rates across networks. We emphasize that wage dispersion arises endogenously as the consequence of the dynamics of networks, firms’ strategies and wage bargaining. Moreover, contrary to a generally accepted idea, social networks do not necessary induce stickiness in unemployment dynamics. Our endogenous matching technology shows that the effects of networks on the dynamics mostly hinge on search externalities. Our endogenous framework allows us to quantify these effects.
    Keywords: social networks, matching, wage dispersion
    JEL: E24 J64 J68
    Date: 2005–09

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