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Local banking market structure and employment dynamics: evidence from US counties

Author

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  • Amit Ghosh

    (Texas A&M International University)

  • Salvador Contreras

    (The University of Texas Rio Grande Valley)

Abstract

Does the local banking market structure affect the local labor market? The answer to this question has important social-economic implications. Using a panel dataset covering over 2700 counties from 1994 to 2020 we find that concentrated banking markets are associated with lower county-level unemployment rates. Exploring transmission mechanisms, we find that concentration increases different categories of bank lending, including small business loans. Higher concentration also leads to small business formation and job creation. Our findings lend support to the relative efficient structure paradigm suggesting concentration in local banking markets results in more efficient banks gaining market shares, increasing their local comparative advantage, in turn improving access to credit and leading to stronger local labor market.

Suggested Citation

  • Amit Ghosh & Salvador Contreras, 2025. "Local banking market structure and employment dynamics: evidence from US counties," Annals of Finance, Springer, vol. 21(2), pages 163-188, June.
    • Handle: RePEc:kap:annfin:v:21:y:2025:i:2:d:10.1007_s10436-025-00461-0
    DOI: 10.1007/s10436-025-00461-0
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    Keywords

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    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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