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Bank deregulation and racial inequality in America

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  • Ross Levine
  • Alexey Levkov
  • Yona Rubinstein

Abstract

We use the cross-state, cross-time variation in bank deregulation across the U.S. states to assess how improvements in banking systems affected the labor market opportunities of black workers. Bank deregulation from the 1970s through the 1990s improved bank efficiency, lowered entry barriers facing nonfinancial firms, and intensified competition for labor throughout the economy. Consistent with Becker’s (1957) seminal theory of racial discrimination, we find that deregulation-induced improvements in the banking system boosted blacks’relative wages by facilitating the entry of new firms and reducing the manifestation of racial prejudices in labor markets.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Boston in its series Risk and Policy Analysis Unit Working Paper with number RPA 12-5.

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Date of creation: 2012
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Handle: RePEc:fip:fedbqu:rpa12-5

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Keywords: Banks and banking ; Labor market ; Wages ; Bank competition;

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  15. Shepherd, William G & Levin, Sharon G, 1973. "Managerial Discrimination in Large Firms," The Review of Economics and Statistics, MIT Press, vol. 55(4), pages 412-22, November.
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