Generating Solutions for Society

“Racial Disparities in the U.S. Mortgage Market,” forthcoming in AEA Papers and Proceedings

We study racial disparities in the U.S. mortgage market. Using new data from Hurtado and Sakong (2024), we present three findings. First, we document access disparities between minority and otherwise- identical White borrowers even within the same bank and loan officer. In contrast, cost disparities are nearly zero. Second, the use of automated underwriting algorithms is associated with smaller access disparities but slightly larger cost disparities. Third, individual factors do not seem to matter much. Our findings represent another step toward understanding the factors driving discriminatory forces in the mortgage market. Recent research suggests structural or organizational factors may also play a role and have been overlooked by previous studies (Hurtado and Sakong, 2024).

Authors: Agustin Hurtado, University of Maryland, Robert H. Smith School of Business; and Jung
Sakong, Federal Reserve Bank of Chicago

“Group Size and Its Impact on Diversity-Related Perceptions and Hiring Decisions in Homogeneous Groups,” published in Organization Science

Can the size of a homogeneous group matter for how it’s perceived and whether it’s diversified? Across experiments and analyses of S&P 1500 corporate boards over time, our research suggests that decision-makers neglect homogeneity in smaller groups while investing extra effort towards diversifying larger homogeneous groups, likely due to increased concerns about lack of diversity, fairness, and potential social sanctions. Our theory can help explain distortions we document in the distribution of the size of homogeneous groups in some of the world’s most powerful organizational groups: S&P 1500 corporate boards. Specifically, for each fewer member on a homogeneous board, boards were 1-2 percentage points less likely to diversify by adding at least one underrepresented member in the year ahead. As corporate board size decreased, we found that all-male and all-White boards became increasingly overrepresented relative to expectations, suggesting greater strategic avoidance of homogeneity in larger groups, but not smaller groups.

Authors: Aneesh Rai (assistant professor, Smith School), Edward H. Chang (assistant professor, Harvard University), Erika L. Kirgios (assistant professor, University of Chicago), Katherine L. Milkman (professor, University of Pennsylvania)