Arbeitspapier
How costly are cultural biases?
We estimate the cost of cultural biases in high-stake economic decisions by comparing agents' peer-to-peer lending choices with those the same agents make under the assistance of an automated robo-advisor. We first confirm substantial in-group vs. out-group and stereotypical discrimination, which are stronger for lenders who reside where historical cultural biases are higher. We then exploit our unique setting to document that cultural biases are costly: agents face 8% higher default rates on favored-group borrowers when unassisted. The returns they earn on favored groups increase by 7.3 percentage points when assisted. The high riskiness of the marginal borrowers from favorite groups largely explains the bad performance of culturally-biased choices. Because varying economic incentives do not reduce agents' biases, inaccurate statistical discrimination-unconscious biased beliefs about borrowers' quality-can explain our results better than taste-based discrimination.
- Language
-
Englisch
- Bibliographic citation
-
Series: LawFin Working Paper ; No. 34
- Classification
-
Wirtschaft
- Subject
-
Trust
Social Capital
Discrimination
Cultural Norms
Robo-Advising
Biased Beliefs
Inter-ethnic Conflict
Social Conditioning
Religion
Caste
- Event
-
Geistige Schöpfung
- (who)
-
D'Acunto, Francesco
Ghosh, Pulak
Jain, Rajiv
Rossi, Alberto G.
- Event
-
Veröffentlichung
- (who)
-
Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)
- (where)
-
Frankfurt a. M.
- (when)
-
2022
- Handle
- URN
-
urn:nbn:de:hebis:30:3-651757
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- D'Acunto, Francesco
- Ghosh, Pulak
- Jain, Rajiv
- Rossi, Alberto G.
- Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)
Time of origin
- 2022
Other Objects (12)
How costly are cultural biases?
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
The global financial crisis: how similar? How different? How costly?
Rent Taxation when Cost Tranfers are Possible, but Costly
Are there biases in the market definition procedure?
Costly miscalibration
The optimal inflation tax when taxes are costly to collect
Estimating the determinants of foreign direct investment inflows: how important are sampling and omitted variable biases?
Spatial Biases in Approximate Arithmetic Are Subject to Sequential Dependency Effects and Dissociate From Attentional Biases
How costly is rent-seeking to diversification: an empirical approach
How costly are cultural biases?
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
The global financial crisis: how similar? How different? How costly?
Rent Taxation when Cost Tranfers are Possible, but Costly
Are there biases in the market definition procedure?
Costly miscalibration
The optimal inflation tax when taxes are costly to collect
Estimating the determinants of foreign direct investment inflows: how important are sampling and omitted variable biases?
Spatial Biases in Approximate Arithmetic Are Subject to Sequential Dependency Effects and Dissociate From Attentional Biases
How costly is rent-seeking to diversification: an empirical approach
How costly are cultural biases?
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
How costly are public sector inefficiencies? A theoretical framework for rationalising fiscal consolidations
The global financial crisis: how similar? How different? How costly?
Rent Taxation when Cost Tranfers are Possible, but Costly
Are there biases in the market definition procedure?
Costly miscalibration
The optimal inflation tax when taxes are costly to collect
Estimating the determinants of foreign direct investment inflows: how important are sampling and omitted variable biases?
Spatial Biases in Approximate Arithmetic Are Subject to Sequential Dependency Effects and Dissociate From Attentional Biases