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When is adverse impact ratio considered ideal to measure and evaluate discrimination in credit decisions?
in Mathematics by Diamond (75,918 points) | 189 views

1 Answer

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AIR is another well-known and widely accepted measure of discrimination used for evaluating yes-no decisions. AIR is the ratio of the acceptance rate for a protected class and the acceptance rate for the control group.

$$\dfrac{Pr(\hat{y} = 1 | X_{p} = 1)}{Pr(\hat{y} = 1 | X_{c} = 1)}$$

A lower AIR would indicate that a lower percentage of applicants within the protected class are accepted than applicants in the control group. Importantly, AIR is one measure of disparate impact that is associated with a published practical significance threshold. Specifically, in some employment law contexts, AIR values below 0.8 that are statistically significant may be considered prima facie evidence of illegal disparate impact discrimination.
by Diamond (75,918 points)

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