The cost of beauty

Good-looking women cost you money. You probably know this already, especially if you're Eliot Spitzer. But it's  true in a particular way, as this new paper by Enrichetta Ravina shows:

I study an online lending market in which 7,321 borrowers posted 11,957 loan requests that included verifiable financial information, photos, an offered interest rate, and related context. Borrowers whose appearance is rated above average are 1.41 percentage points more likely to get a loan and, given a loan, pay 81 basis points less than an average-looking borrower with the same credentials.

However, this isn't because good-lookers are better credit risks. Exactly the opposite. Ms Ravina found that they are three times as likely as average lookers to default.
This is evidence that discrimination in favour of the good-looking, which is common in labour markets, might be taste, not statistical discrimination.
Why does this matter? One big reason is this: "Black borrowers pay between 139 and 146 basis points more than otherwise similar white borrowers."

Comments

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So discimination against the ugly would be perfectly acceptable, if it did not happen to disadvantage black people?

If discrimination is morally wrong, surely it is wrong whoever is at the wrong end of it.

[Jebs House]

I'm not sure what the hold-up is... maybe they have re-thought their stance on how this is going to actually make the company any money. Or perhaps their lawyers pointed out the liability of providing agents a platform to stick their feet in their mouth. Whatever it is, it's hardly something I'd claim as being "Well done".
www.jebshouse.com

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