Experience of Communal Conflicts and Inter-group Lending

Raymond Fisman, Arkodipta Sarkar (), Janis Skrastins () and Vikrant Vig
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Arkodipta Sarkar: London Business School
Janis Skrastins: Washington University in St. Louis

No dp-323, Boston University - Department of Economics - The Institute for Economic Development Working Papers Series from Boston University - Department of Economics

Abstract: We provide microeconomic evidence on the link between ethnic frictions and market efficiency, using dyadic data on managers and borrowers from a large Indian bank. Our analysis builds on the idea that exposure to religion-based communal violence may intensify branch managers’ same-group preferences, and thus result in lending decisions that are more sensitive to a borrower’s religion. We find that, in our sample of Hindu loan officers, those with substantial riot exposure prior to joining the bank lend relatively less to Muslim borrowers. Riot-exposed officers’ loans to Muslims are also less likely to default, suggesting that the lower lending rate for Muslims is driven by taste-based discrimination. This bias is persistent across a bank officer’s tenure, suggesting that the economic costs of ethnic conflict are long-lasting, potentially spanning across generations.

Pages: 52 pages
Date: 2018-12
New Economics Papers: this item is included in nep-dev and nep-ure
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Related works:
Journal Article: Experience of Communal Conflicts and Intergroup Lending (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bos:iedwpr:dp-323

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