A decomposition approach to analysing racial and gender biases in Farm Service Agency's lending decisions

Ya Wu, Cesar Escalante (), Lewell F. Gunter and James Epperson

Applied Economics, 2012, vol. 44, issue 22, 2841-2850

Abstract: This study provides a different perspective in revisiting the racial and gender discrimination issue at the Farm Service Agency (FSA). Employing the Oaxaca--Blinder decomposition method, this study analyses disparities in approved loan amounts among racial and gender classes of borrowers. This study's results indicate substantial differentials in approved loan amount gaps between racial and gender classes, favouring white and female borrowers, respectively. Further scrutiny of the borrowers’ comparative financial conditions presented to FSA to support their loan applications, however, indicate that these borrower groups significantly dominate their peers in a number of measures that indicate their financial strengths and relatively greater capability to repay their future lending obligations. Hence, this study's results can hardly be construed as evidence of biased lending decisions as these borrower groups should rightfully be offered more favourable loan terms, such as larger loan amounts, by the FSA.

Date: 2012
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DOI: 10.1080/00036846.2011.566210

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