TY  - UNPD
A1  - D'Acunto, Francesco
A1  - Ghosh, Pulak
A1  - Jain, Rajiv
A1  - Rossi, Alberto G.
T1  - How costly are cultural biases?
T2  - LawFin working paper ; No. 34
N2  - 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.
T3  - LawFin Working Paper - 34 
KW  - Trust
KW  - Social Capital
KW  - Discrimination
KW  - Cultural Norms
KW  - Robo-Advising
KW  - Biased Beliefs
KW  - Inter-ethnic Conflict
KW  - Social Conditioning
KW  - Religion
KW  - Caste
Y1  - 2022
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/65175
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-651757
UR  - https://ssrn.com/abstract=4147353
N1  - The paper benefited significantly from a fellow visit of Francesco D’Acunto at the Center for Advanced Studies on the Foundations of Law and Finance funded by the German Research Foundation (Deutsche Forschungsgemeinschaft, DFG)–project FOR 2774.
IS  - This version: June 2022
PB  - Center for Advanced Studies on the Foundations of Law and Finance, House of Finance, Goethe University
CY  - Frankfurt am Main
ER  -