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Creditor Learning and Discrimination in Lending

I study the implications of creditor learning for the estimated racial disparity in access to credit. Utilizing a dataset of mortgage lending, I find that the estimated racial disparity in loan approval rates declines with the length of the borrower’s credit history. In addition, minority borrowers improve significantly their chances of obtaining a loan by accumulating longer credit histories, with the improvements being the largest for those with no credit history. Importantly, I find no significant racial disparity among borrowers with long credit histories, suggesting that one cannot reject the null hypothesis of no taste-based discrimination taking place. I also conduct a number of tests to detect statistical discrimination, which yield inconclusive results.