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Finance and inequality in a panel of US States

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  • Ọláyínká Oyèkọ́lá

    (INTO University of Exeter)

Abstract

We examine the impact of sector-based reform on income inequality, concentrating on state banking deregulation in the USA, for which we employ annual balanced panel data from all 50 states and the District of Columbia, covering the period from 1970 to 2000, for our baseline analysis. The estimation strategy exploits the variation across states and years in the enactment of laws that remove restrictions on in-state bank branch geographical expansion and cross-state bank business operational expansion to compute the effects of developments in the financial sector on income inequality. We find evidence that inequality on average decreases with within-state branching reform, whereas it on average increases with between-state banking deregulation. Utilizing five different measures of inequality (top decile income share, Atkinson index, the Gini coefficient, relative mean deviation, and Theil entropy index), we determine that our finding materially depends on which measure of income inequality is being considered. We argue that this has not been stressed in the previous literature.

Suggested Citation

  • Ọláyínká Oyèkọ́lá, 2021. "Finance and inequality in a panel of US States," Empirical Economics, Springer, vol. 61(5), pages 2739-2795, November.
  • Handle: RePEc:spr:empeco:v:61:y:2021:i:5:d:10.1007_s00181-020-01976-3
    DOI: 10.1007/s00181-020-01976-3
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    More about this item

    Keywords

    Finance; Financial sector laws; Banking deregulation; Income inequality; United States;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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