Attention Constraints and Financial Inclusion
We show that attention constraints of decision makers create barriers to financial inclusion. Using administrative data on retail loan screening processes, we find that attention-constrained loan oﬃcers exert less eﬀort reviewing applicants from lower social or economic status (SES) backgrounds and reject them more frequently. More importantly, when externally imposed increases in workload tighten attention constraints, loan oﬃcers are even more prone to quickly rejecting low SES applicants but quickly accepting very high SES applicants without careful review, further widening the approval rate gap between high and low SES applicants — a unique prediction of the attention-based mechanism. Our findings suggest that decision makers’ attention constraints could amplify taste-based and statistical discrimination, which further exacerbates financial inclusion gaps, and that financial technologies that reduce information-processing costs may promote more balanced financial access.