The Long Run Effects of de jure Discrimination in the Credit Market: How Redlining Increased Crime

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Abstract:  Today in the United States the welfare costs of crime are disproportionately borne by individuals living in predominately African-American or Hispanic neighborhoods.  This paper shows that redlining practices established in the wake of the Great Depression make present-day contributions to this inequity.  First I use an unannounced population cutoff that determined which cities were redline-mapped to show that redline-mapping increased present-day city-level crime. Secondly, I use a spatial regression discontinuity to show that redlining influenced the present-day neighborhood-level distribution of crime in Los Angeles, California. Lastly, I identify channels though which redline-mapping influenced crime including increasing racial segregation, decreasing educational attainment and harming housing markets.