Financial Institutions, Neighborhoods, and Racial Inequality

Abstract:
Research has made clear that racial inequality is affected by neighborhood conditions. One important condition is access to financial establishments. We examine how living in minority neighborhoods affects ease of access to conventional banks vs. to alternative financial institutions (AFIs) such as check cashers and payday lenders, which are often more expensive and have at times been called predatory. Based on more than 6 million queries, we compute the difference in the time required to walk, drive, or take public transit to the nearest bank vs. the nearest AFI from the middle of every block in each of 19 of the nation's largest cities. Results suggest that race is strikingly more important than class, as the AFI is more often closer than the bank in well-off minority neighborhoods than in poor white ones. I present additional survey and interview results on the factors underlying these differences.