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Bank deregulation and racial inequality in America

Author

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  • Ross Levine
  • Alexey Levkov
  • Yona Rubinstein

Abstract

We use the cross-state, cross-time variation in bank deregulation across the U.S. states to assess how improvements in banking systems affected the labor market opportunities of black workers. Bank deregulation from the 1970s through the 1990s improved bank efficiency, lowered entry barriers facing nonfinancial firms, and intensified competition for labor throughout the economy. Consistent with Becker’s (1957) seminal theory of racial discrimination, we find that deregulation-induced improvements in the banking system boosted blacks’relative wages by facilitating the entry of new firms and reducing the manifestation of racial prejudices in labor markets.

Suggested Citation

  • Ross Levine & Alexey Levkov & Yona Rubinstein, 2012. "Bank deregulation and racial inequality in America," Risk and Policy Analysis Unit Working Paper RPA 12-5, Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbqu:rpa12-5
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    References listed on IDEAS

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    Cited by:

    1. Kandilov, Ivan T. & Leblebicioğlu, Aslı & Petkova, Neviana, 2017. "Cross-border mergers and acquisitions: The importance of local credit and source country finance," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 288-318.
    2. Popov, Alexander, 2017. "Evidence on finance and economic growth," Working Paper Series 2115, European Central Bank.
    3. Popov, Alexander & Zaharia, Sonia, 2017. "Credit market competition and the gender gap: evidence from local labor markets," Working Paper Series 2086, European Central Bank.
    4. Ghani,Syed Ejaz & Grover,Arti & Kerr,Sari & Kerr,William Robert, 2016. "Will market competition trump gender discrimination in India ?," Policy Research Working Paper Series 7814, The World Bank.
    5. Corrado Giulietti & Mirco Tonin & Michael Vlassopoulos, 2015. "Racial Discrimination in Local Public Services: A Field Experiment in the US," BEMPS - Bozen Economics & Management Paper Series BEMPS33, Faculty of Economics and Management at the Free University of Bozen.

    More about this item

    Keywords

    Banks and banking ; Labor market ; Wages ; Bank competition;

    JEL classification:

    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D3 - Microeconomics - - Distribution
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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