Attention Constraints and Financial Inclusion

76 Pages Posted: 15 Jun 2021 Last revised: 19 Oct 2022

See all articles by Bo Huang

Bo Huang

Renmin University of China - School of Finance

Jiacui Li

David Eccles School of Business, University of Utah

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Mingzhu Tai

The University of Hong Kong, Faculty of Business and Economics

Zoey Yiyuan Zhou

The University of Hong Kong - Faculty of Business and Economics

Date Written: June 1, 2021

Abstract

We show that attention constraints on decision-makers create barriers to financial inclusion. Using administrative data on retail loan-screening processes, we find that attention-constrained loan officers exert less effort reviewing applicants from lower socioeconomic status (SES) backgrounds and reject them more frequently. More importantly, when externally imposed increases in loan officers’ workloads tighten attention constraints, loan officers are even more prone to quickly rejecting low-SES applicants but quickly accepting very high-SES applicants without careful review. Such attention allocation further widens the approval rate gap between high- and low-SES applicants—a unique prediction of the attention-based mechanism. Our findings suggest that decision-makers’ attention constraints could amplify taste-based and statistical discrimination, which further exacerbates financial inclusion gaps.

Keywords: Attention Constraint, Financial Inclusion, Diversity, Retail Lending

JEL Classification: D83, D91, G21

Suggested Citation

Huang, Bo and Li, Jiacui and Lin, Tse-Chun and Tai, Mingzhu and Zhou, Yiyuan, Attention Constraints and Financial Inclusion (June 1, 2021). Available at SSRN: https://ssrn.com/abstract=3865478 or http://dx.doi.org/10.2139/ssrn.3865478

Bo Huang

Renmin University of China - School of Finance

Ming De Main Building
Renmin University of China
Beijing, Beijing 100872
China

Jiacui Li (Contact Author)

David Eccles School of Business, University of Utah ( email )

HOME PAGE: http://https://www.jiacui-li.com/

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Mingzhu Tai

The University of Hong Kong, Faculty of Business and Economics ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Yiyuan Zhou

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

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