Experience of communal conflicts and inter-group lending
Files
First author draft
Date
2018-12-01
DOI
Authors
Fisman, Raymond
Vig, Vikrant
Sarkar, Arkodipta
Skrastins, Janis
Version
OA Version
First author draft
Citation
Raymond Fisman, Vikrant Vig, Arkodipta Sarkar, Janis Skrastins. 2018. "Experience of Communal Conflicts and Inter-group Lending."
Abstract
We provide micro economic evidence on the link between ethnic frictions and market efficiency, using dyadic data on managers and borrowers from a large Indian bank. Our analysis builds on the idea that exposure to religion-based communal violence may intensify branch managers’ same-group preferences, and thus result in lending decisions that are more sensitive to a borrower’s religion. We find that,in our sample of Hindu loan officers, those with substantial riot exposure prior to joining the bank lend relatively less to Muslim borrowers. Riot-exposed officers’ loans to Muslims are also less likely to default, suggesting that the lower lending rate for Muslims is driven by taste-based discrimination. This bias is persistent across a bank officer’s tenure, suggesting that the economic costs of ethnic conflict are long-lasting, potentially spanning across generations.