The illusion of transparency: the political double standard in city credit ratings

Abstract

Abstract Ratings proliferate in social life though underlying biases in how ratings are constructed are obscured. Rating criteria—formal a priori standards about the relevant factors for an evaluation—hold promise for creating transparency, eliminating biases and generating meritocratic evaluations through standardization and uncertainty reduction. Yet, little is known about whether criteria in fact eliminate biases or introduce new complexities. Using original data on credit ratings for 109 US city governments from 2002 to 2009, I test whether a rating agency’s rating criteria is applied evenly across cities. Results provide evidence of a political double standard where liberal-leaning cities are evaluated according to a more strict application of rating criteria requiring these cities to have higher performance for similar ratings compared to their conservative counterparts. These findings highlight a mechanism producing inequality between cities and demonstrate how generating meritocratic and unbiased evaluations requires more than the existence and transparency of rating criteria.