Attention Discrimination under Time Constraints: Evidence from Retail Lending
58 Pages Posted: 15 Jun 2021
Date Written: June 1, 2021
Using proprietary loan screening data, we document that loan officers engage in “attention discrimination”: they exert less effort reviewing ex-ante disadvantage applicants, leading to higher rejection rates than otherwise justified by those applicants’ credit quality. Attention discrimination increases with the officers’ time constraints induced by quasi-random workload variations. When officer workload rises from the bottom to the top decile, they devote 70% less time to disadvantaged applicants, and the approval rate for those applicants declines by three-fifths. Our results indicate that attention constraints magnify discrimination, which provides policy implications about how to reduce discrimination in practice.
Keywords: Attention Constraint, Discrimination, Retail Lending
JEL Classification: D83, D91, G21
Suggested Citation: Suggested Citation