MARKET-STRUCTURE AND DISCRIMINATION - THE CASE OF SMALL BUSINESSES

This paper examines bank marker structure to draw inferences concernin g the role of discrimination in credit markets for small businesses. W e analyze credit application and denial rates, loans outstanding, and interest rates across demographic groups. This set of variables, in co mbination with information on local bank market structure, helps us di stinguish among borrower preferences, lender tastes, and inadequate le nder information as likely causes of differences in credit market expe riences of small business operators from distinct demographic groups. We find that white men and women can expect similar treatment in credi t markets, with some benefits to female-owned firms located in concent rated banking markets. Minorities, by contrast, fare worse than whites . Moreover, by appealing to Becker's (1957) classic theories, we find some clear evidence to support the view that prejudicial discriminatio n is at least partly to blame.