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Big Bad Banks? The Impact of U.S. Branch Deregulation on Income Distribution

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  • Thorsten Beck
  • Ross Levine
  • Alexey Levkov

Abstract

By studying intrastate branch banking reform in the United States, this paper provides evidence that financial markets substantively influence the distribution of income. From the 1970s through the 1990s, most states removed restrictions on intrastate branching, which intensified bank competition and improved efficiency. Exploiting the cross-state, cross-time variation in the timing of bank deregulation, we evaluate the impact of liberalizing intrastate branching restrictions on the distribution of income. We find that branch deregulation significantly reduced income inequality by boosting the incomes of lower income workers. The reduction in income inequality is fully accounted for by a reduction in earnings inequality among salaried workers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13299.

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Date of creation: Aug 2007
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Publication status: published as BECK, T., LEVINE, R. and LEVKOV, A. (2010), Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States. The Journal of Finance, 65: 1637–1667. doi: 10.1111/j.1540-6261.2010.01589.x
Handle: RePEc:nbr:nberwo:13299

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Citations

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Cited by:
  1. Johan Graafland & Bert Ven, 2011. "The Credit Crisis and the Moral Responsibility of Professionals in Finance," Journal of Business Ethics, Springer, vol. 103(4), pages 605-619, November.
  2. Asli Demirguc-Kunt & Ross Levine, 2009. "Finance and Inequality: Theory and Evidence," NBER Working Papers 15275, National Bureau of Economic Research, Inc.
  3. Stelios Michalopoulos & Luc Lueven & Ross Levine, 2010. "Financial Innovation and Endogenous Growth," Discussion Papers Series, Department of Economics, Tufts University 0746, Department of Economics, Tufts University.
  4. Miriam Bruhn & Inessa Love, 2011. "Gender differences in the impact of banking services: evidence from Mexico," Small Business Economics, Springer, vol. 37(4), pages 493-512, November.
  5. Strieborny, M. & Kukenova, M., 2010. "Investment in Relationship-Specific Assets: Does Finance Matter?," Discussion Paper 2010-38S, Tilburg University, Center for Economic Research.
  6. Kpodar, Kangni & Singh, Raju Jan, 2011. "Does financial structure matter for poverty ? evidence from developing countries," Policy Research Working Paper Series 5915, The World Bank.
  7. Bruhn, Miriam & Love, Inessa, 2009. "The economic impact of banking the unbanked : evidence from Mexico," Policy Research Working Paper Series 4981, The World Bank.
  8. Kim, Dong-Hyeon & Lin, Shu-Chin, 2011. "Nonlinearity in the financial development–income inequality nexus," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 310-325, September.
  9. Demirguc-Kunt, Asli & Levine, Ross, 2008. "Finance and economic opportunity," Policy Research Working Paper Series 4468, The World Bank.
  10. Ghosh, Saibal, 2008. "Financial Inclusion and Financial Fragility: An Empirical Note," MPRA Paper 24252, University Library of Munich, Germany.

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