Finance professor Paul Gao's forthcoming study, which indicates that racial discrimination may be the reason historically black colleges and universities (HBCUs) pay higher fees to issue tax-exempt bonds than non-HBCUs, was featured in The Atlantic.
The hard part of the analysis, Gao told me, was figuring out whether the difference could be attributed to any factors other than black colleges’ affiliation with racial minorities. So, the researchers controlled for the bond features such as the amount raised, when the bond will be paid off, and colleges’ ability to pay early. They also looked at the quality of the bank selling the bond, as well as school metrics like enrollment, alumni-giving rates, and rankings. But even after controlling for all of these factors, black colleges still paid significantly more—16 points more than non-HBCUs.