We examine how the numeracy level of employees influences the quality of their on-the-job decisions. Based on an administrative dataset of a retail bank we relate the performance of loan officers in a standardized math test to the accuracy of their credit assessments of small business borrowers. We find that loan officers with a high level of numeracy are more accurate in assessing the credit risk of borrowers. The effect is most pronounced during the pre-crisis credit boom period when it is arguably more difficult to pick out risky borrowers.
Brown, Martin, Karolin Kirschenmann and Thomas Spycher (2017), Numeracy and the Quality of On-the-Job Decisions: Evidence from Loan Officers, ZEW Discussion Paper No. 17-026, Mannheim. Download