Can Human Capital Explain Income-based Disparities in Financial Services?
54 Pages Posted: 25 Jul 2022 Last revised: 19 Oct 2022
Date Written: October 19, 2022
Research shows that access to high-quality financial services varies with local income and wealth. We study how 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 productivity and performance. We find 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 location: low sales, bad loans, and misconduct are more tolerated in low-income branches, exacerbating income-based disparities in financial services.
Keywords: Financial Services, Labor Market, Human Capital, Loan Officer, Mortgage, Housing
JEL Classification: D18, G21, G28, G50, J24, J61, M50
Suggested Citation: Suggested Citation