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What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions

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  • Randall S. Kroszner
  • Philip E. Strahan

Abstract

This paper investigates private-interest, public-interest, and political-institutional theories of regulatory change to analyze state-level deregulation of bank branching restrictions. Using a hazard model, we find that interest group factors related to the relative strength of potential winners (large banks and small, bank-dependent firms) and losers (small banks and the rival insurance firms) can explain the timing of branching deregulation across states during the last quarter century. The same factors also explain congressional voting on interstate branching deregulation. While we find some support for each theory, the private interest approach provides the most compelling overall explanation of our results.

Suggested Citation

  • Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1437-1467.
  • Handle: RePEc:oup:qjecon:v:114:y:1999:i:4:p:1437-1467.
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    File URL: http://hdl.handle.net/10.1162/003355399556223
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