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Alternative financial service providers and the spatial void hypothesis

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  • Smith, Tony E.
  • Smith, Marvin M.
  • Wackes, John

Abstract

This paper studies the spatial relationship between traditional banking services (Banks) and alternative financial service providers (AFSPs). The main objective is to test the so-called spatial void hypothesis that AFSPs tend to locate in markets where traditional banking services are under-provided. The key question of interest here is whether or not AFSPs serve markets with significantly lower income levels than those of Banks. One of the main contributions of this paper is to develop a statistical methodology for addressing this question that builds on previous studies. The present approach is based largely on K-function analyses of both individual and paired point patterns. These Monte Carlo testing procedures are applied to Banks and AFSPs in the four-county region around Philadelphia, Pennsylvania, and are also compared with previous methods. In contrast to previous work, the key finding of the present research is that there is indeed strong empirical support for the spatial void hypothesis in this Philadelphia region.

Suggested Citation

  • Smith, Tony E. & Smith, Marvin M. & Wackes, John, 2008. "Alternative financial service providers and the spatial void hypothesis," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 205-227, May.
  • Handle: RePEc:eee:regeco:v:38:y:2008:i:3:p:205-227
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    References listed on IDEAS

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    1. Kulldorff, Martin, 2006. "Tests of Spatial Randomness Adjusted for an Inhomogeneity: A General Framework," Journal of the American Statistical Association, American Statistical Association, vol. 101, pages 1289-1305, September.
    2. Burkey, Mark L. & Simkins, Scott P., 2004. "Factors Affecting the Location of Payday Lending and Traditional Banking Services in North Carolina," The Review of Regional Studies, Southern Regional Science Association, vol. 34(2), pages 191-205.
    3. Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1077-1106.
    4. Mark J. Flannery & Katherine A. Samolyk, 2005. "Payday lending: do the costs justify the price?," Proceedings 949, Federal Reserve Bank of Chicago.
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    Cited by:

    1. Marieke Huysentruyt & Eva Lefevere & Carlo Menon, 2010. "Bank Location and Financial Liberalization Reforms: Evidence from Microgeographic Data," SERC Discussion Papers 0058, Spatial Economics Research Centre, LSE.
    2. Scott Hegerty, 2016. "Commercial bank locations and “banking deserts”: a statistical analysis of Milwaukee and Buffalo," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(1), pages 253-271, January.
    3. Terri Friedline & Nancy Kepple, 2017. "Does Community Access to Alternative Financial Services Relate to Individuals’ Use of These Services? Beyond Individual Explanations," Journal of Consumer Policy, Springer, vol. 40(1), pages 51-79, March.
    4. Julie Birkenmaier & Qiang Fu, 2016. "The Association of Alternative Financial Services Usage and Financial Access: Evidence from the National Financial Capability Study," Journal of Family and Economic Issues, Springer, vol. 37(3), pages 450-460, September.
    5. Goodstein, Ryan M. & Rhine, Sherrie L.W., 2017. "The effects of bank and nonbank provider locations on household use of financial transaction services," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 91-107.
    6. Alan Walks, 2014. "From Financialization to Sociospatial Polarization of the City? Evidence from Canada," Economic Geography, Clark University, vol. 90(1), pages 33-66, January.
    7. Anping Chen & Marlon Boarnet & Mark Partridge & Christopher S. Fowler & Jane K. Cover & Rachel Garshick Kleit, 2014. "The Geography Of Fringe Banking," Journal of Regional Science, Wiley Blackwell, vol. 54(4), pages 688-710, September.
    8. Murizah Osman Salleh & Aziz Jaafar & M. Shahid Ebrahim, 2012. "Can an interest-free credit facility be more efficient than a usurious payday loan?," Working Papers 12008, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).

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