DP3745 The Bank's Market Power and the Interest Rate Elasticity of Demand for Housing: An Econometric Study of Discrimination on French Mortgage Data

Author(s): Robert J. Gary-Bobo, Sophie Larribeau
Publication Date: February 2003
Keyword(s): discrimination, market power, mortage lending
JEL(s): D40, G21, L13, R21
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3745

We specify several variants of a structural econometric model explaining mortgage interest rates and loan sizes simultaneously. The models are estimated by simultaneous equation methods with a sample of loan files originated from a French mortgage lender. They yield estimates of the interest-rate elasticity of the demand for housing. Different occupational status groups happen to have different values of structural preference parameters. We show how these differences translate into differential treatment of socio-economic groups by the banker.