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The Distributive Impacts of Financial Development: Evidence from Mortgage Markets during US Bank Branch Deregulation

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  • Ishani Tewari

Abstract

Well-functioning credit markets play a key role in boosting overall economic growth, but their impact on distributional outcomes is much less clear. I use a quasi-experimental setting provided by branch banking deregulation, an important episode of US financial development, to study the distributive impacts of finance. Following removal of geographic restrictions on banks in the 1980s and early 1990s, mortgage access increased for lower-middle income groups, young, and also black households. These effects were driven by commercial banks, the only financial institutions subject to the policy. Banks' new screening technologies may have been responsible for this expansion of credit.

Suggested Citation

  • Ishani Tewari, 2014. "The Distributive Impacts of Financial Development: Evidence from Mortgage Markets during US Bank Branch Deregulation," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 175-196, October.
    • Handle: RePEc:aea:aejapp:v:6:y:2014:i:4:p:175-96
    Note: DOI: 10.1257/app.6.4.175
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    Citations

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    Cited by:

    1. Gaurav Khanna & Carlos Medina & Anant Nyshadham & Christian Posso & Jorge Tamayo, 2021. "Job Loss, Credit, and Crime in Colombia," American Economic Review: Insights, American Economic Association, vol. 3(1), pages 97-114, March.
    2. Brown, Sarah & Gray, Daniel & Montagnoli, Alberto, 2019. "Credit supply shocks and household leverage: Evidence from the US banking deregulation," Journal of Financial Stability, Elsevier, vol. 43(C), pages 97-115.
    3. Berger, Allen N. & Öztekin, Özde & Roman, Raluca A., 2023. "Geographic deregulation and bank capital structure," Journal of Banking & Finance, Elsevier, vol. 149(C).
    4. Reilly, Patrick A., 2020. "The effects of credit on high school graduation: Evidence from U.S. bank branching deregulation," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 109-119.
    5. Reilly, Patrick A., 2020. "Credit towards graduation: The impact of US bank deregulation on human capital accumulation," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    6. Ma, Chao, 2020. "Per-customer quantity limit and price discrimination: Evidence from the U.S. residential mortgage market," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    7. Berger, Allen N. & Molyneux, Phil & Wilson, John O.S., 2020. "Banks and the real economy: An assessment of the research," Journal of Corporate Finance, Elsevier, vol. 62(C).
    8. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    9. Unel, Bulent, 2020. "Effects of U.S. Banking Deregulation on Unemployment Dynamics," Journal of Macroeconomics, Elsevier, vol. 65(C).
    10. Pagel, Jeff, 2022. "A natural resource curse: the unintended effects of gold mining on malaria," LSE Research Online Documents on Economics 115532, London School of Economics and Political Science, LSE Library.
    11. Hasan, Iftekhar & Krause, Thomas & Manfredonia, Stefano & Noth, Felix, 2022. "Banking market deregulation and mortality inequality," Bank of Finland Research Discussion Papers 14/2022, Bank of Finland.
    12. Anindo Sarker & Bulent Unel, 2017. "The Impact of Bank Expansion on Self-Employed Business Owners: Evidence from US States," Departmental Working Papers 2017-06, Department of Economics, Louisiana State University.
    13. Lai, Shaojie & Liu, Shiang & Wang, Qing Sophie, 2023. "Déjà Vu: CEO overconfidence and bank mortgage lending in the post-financial crisis period," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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