An Ordered Probit Model for Estimating Racial Discrimination

through Fair Housing Audits.CANOPY ROYCHOUDHURY

and ALLEN C. GOODMAN

Wayne State University

1993

Presented by Mahetem Gessese

• Introduction• Two persons (auditors) with matched characteristics such as age, sex, and

income • Equally eligible for the housing unitDirect methods of measuring of

discrimination

• Except one is black and one is white.• The paper examines the severity of differential treatment• The audit was done in metropolitan Detroit.

•

• Auditing technique, average and marginal level of discrimination

• John Yinger (1986)

• Tai = a + bRi +eai

• Where a, is the audit i, the individual auditor, T is the treatment variable, R

is binary variable for minority status and e, is the random error.

• Yinger argues that the OLS estimator b for beta is unbiased

• However the standard error of b is biased

• He recommends a paired difference- of-means test that would remove the

bias from the standard error of b

• Blacks in Boston were informed 30% fewer units

• The model

• Dj + a0 + aj +Wj + sumBij + sumvik[CiCk] +gYt + eij

• i=1,2,….k

• j=1,1..10

• Y* = Bx +e

Existing theories of Discrimination1) The agent prejudice 2) The customer prejudice 3) The perceived preference4) The rip-off hypothesis

Data569 observations317 collected randomly252 complaints-driven

Regression results

•Dj + a0 + aj +Wj + sumBij + sumvik[CiCk] +gYt + eij

plim(^ j) + j + 1(r2/r2w)/(1- j)

Conclusion

Conclusion

• Widespread discriminatory 1980 –1990

• Marginal discrimination higher than average discrimination