How common is housing discrimination? improving on traditional measures

Fair housing audits are an important tool for measuring the incidence of racial and ethnic discrimination in housing markets. Traditional measures of incidence calculate the proportion of cases in which the white auditor is favored (gross adverse treatment) or the difference between the proportion of white-favored and minority-favored audits (net adverse treatment). The gross measure may overstate discrimination because treatment differences sometimes arise from differences in circumstances across auditor visits. On the other hand, the net measure understates discrimination because audits in which the minority auditor is favored for systematic reasons are incorrectly subtracted. This paper presents a model of agent behavior that more fully accounts for the audit design and employs the estimated parameters to calculate bounds on the incidence of discrimination. This approach leads to a lower bound for the incidence of discrimination that is often substantially higher than the simple net measure and to an upper bound that is close to and sometimes above the simple gross measure.