Decomposing Racial and Ethnic Differences in Small Business Lending: Evidence of Discrimination

Naranchimeg Mijid and Alexandra Bernasek ()

Review of Social Economy, 2013, vol. 71, issue 4, 443-473

Abstract: In this paper, we use the Blinder-Oaxaca method for nonlinear models to decompose observed differences in credit rationing of small businesses between white- and minority-owned firms in the USA. We utilize a representative dataset of small businesses from the Survey of Small Business Finances between 1987 and 2003. Our results show that minority owners, on average, have about a 24 percentage points higher loan denial rate than white-owned firms and about three quarters of the difference is attributed to discrimination in bank lending. Although the difference in the probability of getting a smaller loan than requested is only 5 percentage points, this difference is almost entirely attributed to discrimination.

Date: 2013
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Citations: View citations in EconPapers (13)

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DOI: 10.1080/00346764.2012.761751

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