IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v66y2024i6d10.1007_s00181-023-02527-2.html
   My bibliography  Save this article

Revisiting the effect of bank deregulation on income inequality

Author

Listed:
  • William B. Hankins

    (Jacksonville State University)

  • Anna-Leigh Stone

    (Brock School of Business, Samford University)

  • Gary Hoover

    (Murphy Institute, Tulane University)

Abstract

We use recently developed difference-in-differences methodologies and a panel of US states over the period 1960–2015 to examine how bank branching deregulation impacted state-level income inequality. Existing research relying on traditional two-way fixed effects estimates and event studies provide mixed results. However, these results potentially suffer from biases due to treatment effect heterogeneity and the failure to account for multiple related treatments. Using bias-corrected difference-in-differences procedures and properly accounting for the timing of treatment, we find evidence that the combined effect of intrastate and interstate banking deregulation increased the income share of the top 10%, 5%, and 1% of income earners, respectively. Conversely, we find no evidence that intrastate branching deregulation in isolation impacted income inequality.

Suggested Citation

  • William B. Hankins & Anna-Leigh Stone & Gary Hoover, 2024. "Revisiting the effect of bank deregulation on income inequality," Empirical Economics, Springer, vol. 66(6), pages 2625-2657, June.
    • Handle: RePEc:spr:empeco:v:66:y:2024:i:6:d:10.1007_s00181-023-02527-2
    DOI: 10.1007/s00181-023-02527-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-023-02527-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00181-023-02527-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. de Chaisemartin, Clément & D’Haultfœuille, Xavier, 2023. "Two-way fixed effects and differences-in-differences estimators with several treatments," Journal of Econometrics, Elsevier, vol. 236(2).
    2. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
    3. David Roodman & James G. MacKinnon & Morten Ørregaard Nielsen & Matthew D. Webb, 2019. "Fast and wild: Bootstrap inference in Stata using boottest," Stata Journal, StataCorp LLC, vol. 19(1), pages 4-60, March.
    4. Economides, Nicholas & Hubbard, R Glenn & Palia, Darius, 1996. "The Political Economy of Branching Restrictions and Deposit Insurance: A Model of Monopolistic Competition among Small and Large Banks," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 667-704, October.
    5. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    6. 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, President and Fellows of Harvard College, vol. 114(4), pages 1437-1467.
    7. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    8. Asli Demirgüç-Kunt & Ross Levine, 2009. "Finance and Inequality: Theory and Evidence," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 287-318, November.
    9. Jith Jayaratne & Philip E. Strahan, 1996. "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 639-670.
    10. Clément de Chaisemartin & Xavier d'Haultfoeuille & Yannick Guyonvarch, 2019. "DID_MULTIPLEGT: Stata module to estimate sharp Difference-in-Difference designs with multiple groups and periods," SciencePo Working papers Main hal-03946768, HAL.
    11. Oguzhan C. Dincer & Burak Gunalp, 2012. "Corruption And Income Inequality In The United States," Contemporary Economic Policy, Western Economic Association International, vol. 30(2), pages 283-292, April.
    12. Kien Dao Bui & Ejindu S. Ume, 2020. "Credit Constraints And Labor Supply: Evidence From Bank Branching Deregulation," Economic Inquiry, Western Economic Association International, vol. 58(1), pages 335-360, January.
    13. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    14. 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.
    15. Freeman, Donald G., 2002. "Did state bank branching deregulation produce large growth effects?," Economics Letters, Elsevier, vol. 75(3), pages 383-389, May.
    16. Mark W. Frank, 2009. "Inequality And Growth In The United States: Evidence From A New State‐Level Panel Of Income Inequality Measures," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 55-68, January.
    17. Baker, Andrew C. & Larcker, David F. & Wang, Charles C.Y., 2022. "How much should we trust staggered difference-in-differences estimates?," Journal of Financial Economics, Elsevier, vol. 144(2), pages 370-395.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Evren Damar & Ian Lange & Caitlin McKennie & Mirko Moro, 2024. "Banking deregulation and consumption of home durables," Climatic Change, Springer, vol. 177(3), pages 1-20, March.
    2. Ọláyínká Oyèkọ́lá, 2021. "Finance and inequality in a panel of US States," Empirical Economics, Springer, vol. 61(5), pages 2739-2795, November.
    3. Kim, Daniel Sungyeon & Lee, Jaeyoon & Choi, Bong-Geun, 2022. "Credit supply and household long-term well-being: Evidence from banking deregulation," Economics Letters, Elsevier, vol. 219(C).
    4. Alexander Karaivanov & Dongwoo Kim & Shih En Lu & Hitoshi Shigeoka, 2022. "COVID-19 vaccination mandates and vaccine uptake," Nature Human Behaviour, Nature, vol. 6(12), pages 1615-1624, December.
    5. Roth, Jonathan & Sant’Anna, Pedro H.C. & Bilinski, Alyssa & Poe, John, 2023. "What’s trending in difference-in-differences? A synthesis of the recent econometrics literature," Journal of Econometrics, Elsevier, vol. 235(2), pages 2218-2244.
    6. Anne Beck & Sebastian Doerr, 2023. "The financial origins of regional inequality," BIS Working Papers 1151, Bank for International Settlements.
    7. Arold, W. Benjamin & Woessmann, Ludger & Zierow, Larissa, 2022. "Can Schools Change Religious Attitudes? Evidence from German State Reforms of Compulsory Religious Education," IZA Discussion Papers 14989, Institute of Labor Economics (IZA).
    8. Kamila Cygan-Rehm, 2022. "Lifetime Consequences of Lost Instructional Time in the Classroom: Evidence from Shortened School Years," CESifo Working Paper Series 9892, CESifo.
    9. Albert Chiu & Xingchen Lan & Ziyi Liu & Yiqing Xu, 2023. "Causal Panel Analysis under Parallel Trends: Lessons from A Large Reanalysis Study," Papers 2309.15983, arXiv.org, revised Mar 2025.
    10. Zhang, Renjie & Zhu, Guiyi, 2024. "Green public procurement and firms' pollution emissions: Does demand-side environmental policy matter?," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1958-1978.
    11. Schoner, Florian & Mergele, Lukas & Zierow, Larissa, 2024. "Grading student behavior," Labour Economics, Elsevier, vol. 90(C).
    12. Goussé, Marion & Leturcq, Marion, 2022. "More or less unmarried. The impact of legal settings of cohabitation on labour market outcomes," European Economic Review, Elsevier, vol. 149(C).
    13. Rik Chakraborti & Gavin Roberts, 2023. "How price-gouging regulation undermined COVID-19 mitigation: county-level evidence of unintended consequences," Public Choice, Springer, vol. 196(1), pages 51-83, July.
    14. Chen, Jidong & Shi, Xinzheng & Zhang, Ming-ang & Zhang, Sihan, 2024. "Centralization of environmental administration and air pollution: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).
    15. repec:ags:aaea22:335779 is not listed on IDEAS
    16. Carlos F. Avenancio-León & Alessio Piccolo & Leslie Sheng Shen, 2024. "Self-reinforcing Glass Ceilings," Working Papers 24-14, Federal Reserve Bank of Boston.
    17. Taskin, Ahmet Ali & Yaman, Firat, 2023. "The effect of branching deregulation on finance wage premium," FAU Discussion Papers in Economics 08/2023, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    18. Costa-Font, Joan & Jiménez-Martín, Sergi & Vilaplana-Prieto, Cristina, 2022. "Do Public Caregiving Subsidies and Supports affect the Provision of Care and Transfers?," Journal of Health Economics, Elsevier, vol. 84(C).
    19. Mikhail Mamonov & Anna Pestova & Steven Ongena, 2023. "“Crime and Punishment”? How Banks Anticipate and Propagate Global Financial Sanctions," CERGE-EI Working Papers wp753, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    20. Li, Daiyue & Jin, Yanhong & Cheng, Mingwang, 2024. "Unleashing the power of industrial robotics on firm productivity: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 500-520.
    21. Meinhofer, Angélica & Witman, Allison E. & Hinde, Jesse M. & Simon, Kosali, 2021. "Marijuana liberalization policies and perinatal health," Journal of Health Economics, Elsevier, vol. 80(C).

    More about this item

    Keywords

    Bank deregulation; Intrastate deregulation; Interstate deregulation; Income inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:66:y:2024:i:6:d:10.1007_s00181-023-02527-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.