Abstract

https://ssrn.com/abstract=2759560
 


 



Credit Reports as Résumés: The Incidence of Pre-Employment Credit Screening


Alexander Wickman Bartik


Massachusetts Institute of Technology (MIT), Department of Economics, Students

Scott Nelson


Massachusetts Institute of Technology (MIT), Department of Economics, Students

March 7, 2016

MIT Department of Economics Graduate Student Research Paper 16-01

Abstract:     
We study recent bans on employers' use of credit reports to screen job applicants – a practice that has been popular among employers, but controversial for its perceived disparate impact on racial minorities. Exploiting geographic, temporal, and job-level variation in which workers are covered by these bans, we analyze these bans' effects in two datasets: the panel dimension of the Current Population Survey (CPS); and data aggregated from state unemployment insurance records. We find that the bans reduced job-finding rates for blacks by 7 to 16 log points, and increased subsequent separation rates for black new hires by 3 percentage points, arguably contrary to the bans' intended effects. Results for Hispanics and whites are less conclusive. We interpret these findings in a statistical discrimination model in which credit report data, more so for blacks than for other groups, send a high-precision signal relative to the precision of employers' priors.

Number of Pages in PDF File: 49

Keywords: Unemployment, Employment Discrimination, Signaling, Hiring, Firing, Policy Analysis

JEL Classification: J680, J780, M510, J630, D040, D820


Open PDF in Browser Download This Paper

Date posted: April 8, 2016 ; Last revised: January 16, 2017

Suggested Citation

Bartik, Alexander Wickman and Nelson, Scott, Credit Reports as Résumés: The Incidence of Pre-Employment Credit Screening (March 7, 2016). MIT Department of Economics Graduate Student Research Paper 16-01. Available at SSRN: https://ssrn.com/abstract=2759560

Contact Information

Alexander Wickman Bartik (Contact Author)
Massachusetts Institute of Technology (MIT), Department of Economics, Students ( email )
Cambridge, MA
United States
HOME PAGE: http://economics.mit.edu/grad/abartik
Scott Nelson
Massachusetts Institute of Technology (MIT), Department of Economics, Students ( email )
50 Memorial Drive
Bldg E52
Cambridge, MA 02142
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,177
Downloads: 290
Download Rank: 81,716