Can Credit Market Signalling Improve Labor Market Outcomes?
According to a Survey by the Society for Human Resource Management, 25% of human resource representatives interviewed in 1998 indicated that the companies they worked for ran credit checks on potential employees while the fraction increased to 43% in 2004. In this paper, we explore how such credit checks (information on observable credit market actions) might help separate workers with heterogeneous unobservable productivity. Ever since Spence , we've known that observable actions which are correlated with unobservable productivities can be used to separate workers. We show by means of example that if the number of observable actions in the education market is smaller than the number of unobservable types, then it might be efficient for employers to include observable credit market actions in their Bayesian assessment of worker type. We then assess the welfare consequences of a law (the Equal Employment for All Act (H.R. 3149)) prohibiting the use of credit information in employment decisions which currently sits before Congress.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Willen & Igal Hendel & Joel Shapiro, 2004.
"Educational Opportunity and Income Inequality,"
NBER Working Papers
10879, National Bureau of Economic Research, Inc.
- Igal Hendel & Joel Shapiro & Paul S. Willen, 2004. "Educational opportunity and income inequality," Public Policy Discussion Paper 04-5, Federal Reserve Bank of Boston.
- Igal Hendel & Joel Shapiro & Paul Willen, 2003. "Educational Opportunity and Income Inequality," Working Papers 89, Barcelona Graduate School of Economics.
- Kelly Bedard, .
"Human Capital Versus Signaling Models: University Access and High School Drop-outs,"
Claremont Colleges Working Papers
1999-01, Claremont Colleges.
- Kelly Bedard, 2001. "Human Capital versus Signaling Models: University Access and High School Dropouts," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 749-775, August.
- Kelly Bedard, . "Human Capital Versus Signaling Models: University Access and High School Drop-outs," Canadian International Labour Network Working Papers 19, McMaster University.
- Satyajit Chatterjee & Dean Corbae & José-Víctor Ríos-Rull, 2007.
"A finite-life private-information theory of unsecured consumer debt,"
07-14, Federal Reserve Bank of Philadelphia.
- Chatterjee, Satyajit & Corbae, Dean & Ríos-Rull, José-Víctor, 2008. "A finite-life private-information theory of unsecured consumer debt," Journal of Economic Theory, Elsevier, vol. 142(1), pages 149-177, September.
- Hanming Fang, 2006. "Disentangling The College Wage Premium: Estimating A Model With Endogenous Education Choices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1151-1185, November.
- Spence, Michael, 1974. "Competitive and optimal responses to signals: An analysis of efficiency and distribution," Journal of Economic Theory, Elsevier, vol. 7(3), pages 296-332, March.
When requesting a correction, please mention this item's handle: RePEc:red:sed010:685. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.