The effects of federal “Redlining” maps: A new empirical strategy

This paper proposes a new empirical strategy to estimate the causal effects of 1930s federal “redlining” – the mapping and grading of US neighborhoods by the Home Owners’ Loan Corporation (HOLC). Our analysis exploits an exogenous population cutoff: only cities above 40,000 residents were mapped. We employ a difference-in-differences design, comparing areas that received a particular grade with neighborhoods that would have received the same grade if their city had been mapped. The control neighborhoods are defined using a machine learning algorithm trained to draw HOLC-like maps using newly geocoded full-count census records. For the year 1940, we find a substantial reduction in property values and homeownership rates in areas with the lowest grade, along with an increase in the share of African American residents. We also find sizable house value reductions in the second-to-lowest grade areas. Such negative effects on property values persisted until the early 1980s. Our results illustrate that government interventions can coordinate individual discriminatory practices and amplify their consequences.