Amit Kumar

We arranged for trained undercover men and women to pose as potential clients and visit all 65 local financial advisory firms in Hong Kong. At financial planning firms, but not at securities firms, women were more likely than men to receive advice to buy only individual or only local securities. Female clients who signaled that they were highly confident, highly risk tolerant or had a domestic outlook, were especially likely to receive this suboptimal advice. Our theoretical model explains these patterns as the result of statistical discrimination interacting with advisors’ incentives. Taste-based discrimination is unlikely to explain the results.

Borrowers may misestimate their probability of mortgage approval in the absence of precise signals of creditworthiness. Credit reports, which contain such signals, became easily accessible for all U.S. consumers since 2005, while it was already the case in seven states. A difference-in-differences strategy exploiting this change shows that pool quality of mortgage applicants improved as a result—approvals increased, whereas subsequent delinquencies decreased. These findings are consistent with a mechanism where under-estimators enter the applicant pool and over-estimators drop out, because easier access to credit reports reduces misestimation of one’s own probability of mortgage approval. Additional findings rule out supply-driven explanations.

Hazardous but previously unmonitored and unregulated, per- and polyfluoroalkyl substances (PFAS) were detected in 2016 in municipal drinking water systems across 33 US states during the first-ever PFAS testing. A paired-county difference-in-differences design that compares contaminated counties with neighboring, same-state uncontaminated counties shows that the contamination discovery raised municipal bond offering yields by 14 basis points. Municipal revenues, taxes, employment, and expenditures declined, while population out-migration increased. Consistent with the contamination requiring a higher compensating wage differential, wages in tradable industries rose, but job creation fell, and firm closures increased. Self-employment increased as well, indicating a heightened local unemployment risk.