Business College Professor Presents Paper at Brookings Institute Conference on Discrimination in Municipal Lending |


FunMatthew Winter, a research professor at Stony Brook University’s College of Business, presented his paper, “The Black Tax: Evidence of Racial Discrimination in Municipal Borrowing Costs,” at the Brookings Institution’s 2022 Municipal Finance Conference.

The paper, co-authored with Ashleigh Eldemir Poindexter of the University of Tennessee and Kimberly Luchtenberg of American University, shows that municipalities with large proportions of black residents pay higher borrowing costs to issue rated bonds than other cities and counties. State and year. These higher costs are not explained by credit risk, are more pronounced in states with higher levels of racial resentment, and are stronger in state-tax incentives to hold municipal bonds.

In a series of tests using political election periods as racial resentment is intensifying, the research has confirmed that the disparity in credit is also increasing. Overall, the findings suggest that racial discrimination increases the cost of borrowing, particularly where racial prejudice is strong.

The Brookings Conference is considered the best municipal finance conference in the field, with the most selective and attended academics, policy makers and market participants.

Winter had another paper on minority and low-income homeownership accepted by the Review of Corporate Finance Studies. “Does Home Ownership Reduce the Wealth Gap for Low-Income and Minority Families?” It uses limited data from the US Department of Housing and Urban Development’s (HUD) Housing Choice Voucher (HCV) program to study the wealth effects of homeownership for low-income families.

The paper examines whether homeownership affects the wealth of low-income white and minority families. HUD’s HCV program provides housing assistance for rent and mortgage payments to low-income families. To identify whether homeownership affects wealth, the paper compares a household’s wealth as a renter to its own wealth and uses the between-household wealth effect to measure the effect of homeownership on racial inequality. Using this differences-in-differences approach, the study controls for many unobserved and potentially confounding differences that may affect wealth accumulation within households, while also allowing wealth outcomes to differ by race.

Using this empirical approach, the paper finds that low-income households that receive assistance to become homeowners experience wealthier housing relative to their rental tenure. But these gains in wealth are not shared among low-income minority families. The findings provide evidence that homeownership is a driver of wealth formation for low-income households and that homeownership does not inherently reduce wealth disparities.

Winter conducts research focusing on behavioral and international finance. His research has been presented at finance and economics conferences around the world, including the Brookings Institution, the American Economic Association and the China International Finance Conference. His research has been published in the Journal of Corporate Finance Studies, World Economy and Management, Policy and Practice.



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