Authors: Raffi E. Garcia and William A. Darity, Jr.
Abstract: Using hand-collected race information about small business owners that concealed their race in Paycheck Protection Program applications, we find evidence that not disclosing race information in loan applications pays off significantly. Our results show that Black-owned businesses that concealed their race obtained 52 percent more in funding than self-reported Black-owned businesses. Interestingly, White-owned businesses that also concealed their race information obtained approximately 10 percent more in funding relative to self-reported White-owned businesses. However, the effect is not statistically significant. Our findings are consistent with a prisoner’s dilemma theoretical framework in which all participants are better off by not self-reporting race.
Key Findings
- Racial self-identification, the process of identifying as belonging to one racial-ethnic group or another, can be a fraught process that encapsulates many competing factors and incentives.
- One research area of particular interest concerns this identification in high-stakes situations, such as applying to college, for a mortgage, or for personal or business loans.
