Ban The Box? Information, Incentives, and Statistical Discrimination

TL;DR

This paper analyzes how banning the box policy influences hiring practices, applicant incentives, and market outcomes, revealing complex effects that can benefit or harm employers and applicants depending on market structure.

Contribution

It provides a theoretical framework showing the varied impacts of banning the box on both employers and applicants, considering equilibrium behaviors and incentives.

Findings

Banning the box can be Pareto improving or worsening for employers and applicants.

Market structure determines whether banning the box benefits or harms parties.

Policy implications extend to credit checks and college admissions.

Abstract

"Banning the Box" refers to a policy campaign aimed at prohibiting employers from soliciting applicant information that could be used to statistically discriminate against categories of applicants (in particular, those with criminal records). In this article, we examine how the concealing or revealing of informative features about an applicant's identity affects hiring both directly and, in equilibrium, by possibly changing applicants' incentives to invest in human capital. We show that there exist situations in which an employer and an applicant are in agreement about whether to ban the box. Specifically, depending on the structure of the labor market, banning the box can be (1) Pareto dominant, (2) Pareto dominated, (3) benefit the applicant while harming the employer, or (4) benefit the employer while harming the applicant. Our results have policy implications spanning beyond employment decisions, including the use of credit checks by landlords and standardized tests in college admissions.