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Bank deserts in the USA and the Great Recession: geography and demographics

Author

Listed:
  • Russell D. Kashian
  • Ran Tao
  • Robert Drago

Abstract

Purpose - The purpose of this paper is to identify bank deserts in the USA in 2009 and 2015, separately for inner city, suburban, and rural areas. It also identifies correlations between bank deserts, population characteristics, market competition, and payday lending restrictions, both cross-sectionally and over time. Design/methodology/approach - FDIC data on bank office locations are used to identify bank deserts, defined as the 5 percent of census tracts with the greatest distance from the centroid to the nearest office. Those data are matched to both American Community Survey data to identify population characteristics, to a list of states with payday lending prohibitions, and to levels of market competition. An alternative measure of bank deserts corrects for population density. Geography is analyzed, mean characteristics compared, and random effects regressions capture static and dynamic correlates. Findings - Population density explains approximately half of bank distance variance. Bank deserts appear more often in southern and western states, and expanded significantly in inner cities while contracting in rural areas. Regression results suggest that African Americans were overall and increasingly likely to live in bank deserts and Native Americans were overall more likely to live in rural bank deserts. Rural poverty is linked to bank deserts, and the effects of competition are complex. Practical implications - The space for policy intervention exists in African American inner cities and Native American rural communities. Originality/value - The relative measure of bank deserts is novel, as are dynamic estimates and random effects analysis of correlates.

Suggested Citation

  • Russell D. Kashian & Ran Tao & Robert Drago, 2018. "Bank deserts in the USA and the Great Recession: geography and demographics," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(4), pages 691-709, September.
  • Handle: RePEc:eme:jespps:jes-05-2017-0121
    DOI: 10.1108/JES-05-2017-0121
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    Citations

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    Cited by:

    1. Russell Kashian & Robert Drago, 2020. "Race in relation to bank depositors and mortgage applications," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 49(3), September.
    2. Buchman, Tracy & Cliff, Summer & Kashian, Russell, 2021. "Maternity Ward Deserts in Wisconsin, 2011 and 2017," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 51(2), August.
    3. Scott W. Hegerty, 2021. "Bank Density, Population Density, and Economic Deprivation Across the United States," Papers 2105.07823, arXiv.org.
    4. Julie Birkenmaier & Qiang John Fu, 2021. "Is bank staff interaction associated with customer saving behavior in banks?," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(1), pages 332-350, March.
    5. Scott W. Hegerty, 2022. "Banking Deserts," City Size, and Socioeconomic Characteristics in Medium and Large U.S. Cities," Papers 2203.03069, arXiv.org.
    6. Pankaj Kumar Maskara & Emre Kuvvet & Gengxuan Chen, 2021. "The role of P2P platforms in enhancing financial inclusion in the United States: An analysis of peer‐to‐peer lending across the rural–urban divide," Financial Management, Financial Management Association International, vol. 50(3), pages 747-774, September.

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