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Infrequent Identity Signals and Detection Risks in Audit Correspondence Studies

Catherine Balfe, Patrick Button, Mary Penn and David Schwegman

No 28718, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Audit correspondence studies are field experiments that test for discriminatory behavior in active markets. Researchers measure discrimination by comparing how responsive individuals ("audited units") are to correspondences from different types of people. This paper elaborates on the tradeoffs researchers face between sending audited units only one correspondence and sending them multiple correspondences, especially when including less common identity signals in the correspondences. We argue that when researchers use audit correspondence studies to measure discrimination against individuals that infrequently interact with audited units, they raise the risk that these audited units become aware they are being studied or otherwise act differently. We present the result of an audit correspondence study that demonstrates how this detection can occur when researchers send more than one correspondence from an uncommon minority group. We show how this detection leads to attenuated (downwardly biased) estimates of discrimination.

JEL-codes: C93 J15 J16 J71 K42 Z13 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-acc, nep-exp, nep-law and nep-lma
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