Labor market effects of deleting delinquencies

We study the labor market effects of restricting access to credit information in hiring using a nationwide Chilean policy that temporarily removed recent delinquencies from the credit reports of unemployed workers. The law disproportionately affects low-income workers, who face longer unemployment spells after its implementation, with especially large effects for younger and female workers. These patterns are consistent with reduced screening precision when credit histories are unavailable. Our findings show that such policies can generate cross-subsidization from low-income workers with clean credit histories toward those with recent delinquencies.

Duke Scholars

Author Gonzalo Maturana Fuqua School of Business