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Who Benefits from Bans on Employers’ Credit Checks?

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Listed:
  • Leora Friedberg
  • Richard M. Hynes
  • Nathaniel Pattison

Abstract

Several US states ban employers’ use of credit reports in hiring decisions. This paper evaluates whether these bans help financially distressed individuals find employment. We use the Survey of Income and Program Participation to identify individuals likely to directly benefit: unemployed individuals with recent trouble meeting expenses. Exploiting the staggered passage of state laws, we find that banning credit checks increases the job-finding rates among financially distressed job seekers by about 28 percent. We also find an increase in the employment duration of financially distressed individuals who do find jobs, which suggests that they obtain more stable and permanent positions. Finally, we find a small and insignificant change in job-finding rates among nondistressed individuals, but we cannot rule out that this group is harmed by pooling with financially distressed individuals.

Suggested Citation

  • Leora Friedberg & Richard M. Hynes & Nathaniel Pattison, 2021. "Who Benefits from Bans on Employers’ Credit Checks?," Journal of Law and Economics, University of Chicago Press, vol. 64(4), pages 675-703.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/714352
    DOI: 10.1086/714352
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    Cited by:

    1. Will Dobbie & Paul Goldsmith‐Pinkham & Neale Mahoney & Jae Song, 2020. "Bad Credit, No Problem? Credit and Labor Market Consequences of Bad Credit Reports," Journal of Finance, American Finance Association, vol. 75(5), pages 2377-2419, October.

    More about this item

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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