Title

Can Human Capital Explain Income-based Disparities in Financial Services?

Publication Date

7-15-2022

Abstract

Research shows that access to high-quality financial services varies with local income and wealth. We explore the extent to which financial firms’ internal labor allocation decisions contribute to these disparities. Using a near-comprehensive panel of over 350,000 U.S. mortgage loan officers, we document large and persistent differences in loan officer productivity and performance. We then show that firms’ hiring and promotion policies disproportionately assign workers with less experience or poor track records to branches serving low-income customers. Further, the consequences of poor performance differ by branch location: low sales numbers, underwriting bad loans, and committing misconduct are tolerated more in low-income branches, exacerbating income-based disparities in financial services.

Document Type

Article

Keywords

Financial Services, Labor Market, Human Capital, Loan Officer, Mortgage, Housing

Disciplines

Finance

DOI

10.2139/ssrn.4164137

Source

SMU Cox: Finance (Topic)

Language

English

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