An economic riddle (credit markets in Italy)

We have examined the pattern of lending rates on overdraft facilities in Italy with a unique and large data set. This borrowing channel is especially im- portant for the self-employed and micro firms, which, in Italy, are especially numerous relative to other OECD countries. We document that women pay a higher interest rate even after controlling for a host of characteristics of the borrower, the bank and the structure of the banking sector. In fact, we find that the same bank charges more to women than men, so the result cannot be explained by women using different types of bank than men. We have tried to control as well as we could for risk factors like type of business, past credit history and the presence of guarantors, but the differential remains. Incidentally, women-owned businesses display a lower failure rate than male- owned ones in Italy. We also find that, in places with higher social capital and trust, banks charge lower interest, and the amount of this effect is quite large, but the differential between male and female borrowing rates is not confined in places with low social capital. Both men and women pay lower interest in places with high social capital, but women benefit less.

The authors (Alesina, Lotti, & Mistrulli, Journal of the European Economic Association, January, 2013) add:

The result is very robust. One interpretation is statistical discrimination, women being riskier than men. But we find that, on average, women show a better history then men in terms of past episodes of bad loans or bankrupt- cies. Guarantors are considered a risk factor for men: male borrowers are charged more if they have to post a guarantor. For women, is the opposite: when they post a male guarantor, their interest goes down, but, interestingly, if they have a female guarantor, the interest they pay goes way up. It would appear that even the gender of guarantor is considered a risk factor for banks, pointing out again the presence of some degree of taste-based discrimination. As discussed above, we could not explain the male versus female differential with many variables meant to capture differential risk, but it is possible that a bank has more information than the econometrician.

The full paper is here.  

Alesina, by the way, is one of the most productive economists today. See for example his recent paper on the link between diversity of birthplace and economic prosperity.