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A decomposition approach to analysing racial and gender biases in Farm Service Agency's lending decisions

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Abstract:

This study provides a different perspective in revisiting the racial and gender discrimination issue at the Farm Service Agency (FSA). Employing the Oaxaca–Blinder decomposition method, this study analyses disparities in approved loan amounts among racial and gender classes of borrowers. This study's results indicate substantial differentials in approved loan amount gaps between racial and gender classes, favouring white and female borrowers, respectively. Further scrutiny of the borrowers’ comparative financial conditions presented to FSA to support their loan applications, however, indicate that these borrower groups significantly dominate their peers in a number of measures that indicate their financial strengths and relatively greater capability to repay their future lending obligations. Hence, this study's results can hardly be construed as evidence of biased lending decisions as these borrower groups should rightfully be offered more favourable loan terms, such as larger loan amounts, by the FSA.

Keywords: Farm Service Agency; G21; Oaxaca–Blinder decomposition; Q00; Q14; agricultural lending; gender bias; racial bias

Document Type: Research Article

DOI: https://doi.org/10.1080/00036846.2011.566210

Affiliations: 1: Department of Agricultural and Applied Economics,University of Georgia, 301 Conner HallAthensGA 30602, USA 2: Department of Agricultural and Applied Economics,University of Georgia, 315 Conner HallAthensGA 30602, USA

Publication date: 2012-08-01

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