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

Ruidi Huang¹; James S. Linck¹; Erik J. Mayer²; Christopher A. Parsons³

¹ Southern Methodist University · ² University of Wisconsin–Madison · ³ University of Southern California

Research shows that access to high-quality financial services varies with local income and wealth. We study how financial firms’ internal allocation of human capital contributes 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 practices allocate 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.

DOI

10.1093/rfs/hhae004

Volume

39 (6)

Pages

1785-1822

Language

en

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BibTeX

Sources

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