Department or Program


Primary Wellesley Thesis Advisor

Daniel Fetter


This paper investigates the impact of the Community Reinvestment Act (CRA), a government policy encouraging mortgage lending to low-to-moderate income areas, on mortgage lending and community outcomes in the targeted areas. I exploit the cutoff regulators used to determine if a tract has low-to-moderate income to examine the impact of the policy through a regression discontinuity. Using data from the Home Mortgage Disclosure Act and the 1990 Census, I find that CRA has an effect of about 5.4% on the number of originations for 1994-1999 in large MSA’s. Additionally, I examine the effect of CRA on community outcome variables using data from the 2000 Census: homeownership, median home values, mobility, high school degree attainment, college degree attainment, employment-to-population ratio, unemployment rate, labor force participation, and commuting time. I find that there is little evidence of significant effects of CRA on the community outcome variables. I also conduct an IV test to examine the effect of the increase on mortgage supply on the community outcomes; similar to the reduced form results, I find little evidence of a significant large effect.