Explaining Racial Disparities in Personal Bankruptcy Outcomes

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

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Paper Title: Explaining Racial Disparities in Personal Bankruptcy Outcomes

Speaker: Ben Iverson, Associate Professor of Finance

Time and Date: 12 – 1 pm, Wednesday 14 June 2023 (AEST)

Venue: Face-to-face seminar in room CB08.08.02, Level 8, Building 8, University of Technology Sydney, 14-28 Ultimo Rd, Ultimo, Sydney, Australia (Map of campus)

Abstract and paper:  We document substantial racial disparities in consumer bankruptcy outcomes and investigate the role of racial bias in contributing to these disparities. Using data on the near universe of US bankruptcy cases and deep-learning imputed measures of race, we show that Black filers are 21 and 3 percentage points (pp) more likely to have their bankruptcy cases dismissed without any debt relief in Chapters 13 and 7, respectively. We uncover strong evidence of racial homophily in Chapter 13: Black filers are 10 pp more likely to be dismissed when randomly assigned to a white bankruptcy trustee. To interpret our findings, we develop a general decision model and new identification results relating homophily to bias. Using this framework and our homophily estimate, we conclude that at least 40% of the 21 pp dismissal gap is due to either taste-based or inaccurate statistical racial discrimination. Link to paper here. 

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Co-ordinator: Kenny Phua

Enquiries: Chloe Qu

 

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