IFin Seminar, Erica Jiang - UCLA Anderson School of Management - Credit Without Proximity: Informational Frictions and Unequal Gains from Technology
Institute of Finance
Date: 27 November 2025 / 12:25 - 13:40
Red Room Executive Center (West Campus)
Speaker: Erica Jiang - UCLA Anderson School of Management
Title: Credit Without Proximity: Informational Frictions and Unequal Gains from Technology
Date: November 27, 2025
Time: 12:25 - 13:40
Room: Red Room (Exec Center)
USI West Campus
Abstract
We study how technological advances that change the relative efficiency of local and remote screening affect information production, credit rationing, and allocative efficiency. Using administrative data linking loan officers to applications and loan outcomes, we document that informational frictions are first-order; local and remote loan officers differ sharply in screening precision and processing speed; and lenders’ labor-allocation decisions respond strongly to local wage differentials, generating systematic spatial misalignment between mortgage demand and local underwriting capacity. Motivated by these patterns, we develop and estimate a structural model in which lenders compete in mortgage pricing and in labor markets for heterogeneous loan officers, borrowers with different unobserved default risks sort on prices, and screening precision varies with officer type. The model implies substantial baseline credit rationing—up to 15 percent in high-risk segments—with local officers eliminating roughly half while also reducing false approvals. A technology shock that increases the physical efficiency of remote work induces lenders to substitute away from local screening, reducing informational efficiency, raising pooled origination and expected defaults, and tightening rationing for marginal borrowers despite only modest reductions in rates.