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Not all banks are equal. Cooperative banking and income inequality

Author

Listed:
  • Raoul Minetti

    (Michigan State University)

  • Pierluigi Murro

    (LUISS University)

  • Valentina Peruzzi

    (LUISS University)

Abstract

The re-regulation wave following the global financial crisis is putting pressure on local community and cooperative banks. In this paper, we show that cooperative banking can play a pivotal role in reducing income inequalities in local communities. By analyzing Italian local (provincial) credit markets over the 2001-2011 period, we find that cooperative banks mitigate income inequality more than their commercial counterparts. The results also suggest that it is the specific nature and orientation of cooperative banks, more than their relationship lending technologies, that improve income distribution. The impact of cooperative banking on inequality appears however to be partly channeled by a reduced dynamism of local economies, especially lower migratory flows and business turnover.

Suggested Citation

  • Raoul Minetti & Pierluigi Murro & Valentina Peruzzi, 2019. "Not all banks are equal. Cooperative banking and income inequality," CERBE Working Papers wpC31, CERBE Center for Relationship Banking and Economics.
    • Handle: RePEc:lsa:wpaper:wpc31
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    2. Pierluigi Murro & Valentina Peruzzi, 2022. "Relationship lending and the use of trade credit: the role of relational capital and private information," Small Business Economics, Springer, vol. 59(1), pages 327-360, June.
    3. Katherine Coronel-Pangol & Jessica Paule-Vianez & Carmen Orden-Cruz, 2024. "Conventional or alternative financing to promote entrepreneurship? An analysis of female and male entrepreneurship in developed and developing countries," International Entrepreneurship and Management Journal, Springer, vol. 20(1), pages 163-187, March.
    4. Peruzzi, Valentina & Murro, Pierluigi & Di Colli, Stefano, 2023. "The distributional impact of local banking. Evidence from the financial and sovereign-debt crises," European Journal of Political Economy, Elsevier, vol. 80(C).
    5. Bellardini, Luca & Murro, Pierluigi & Previtali, Daniele, 2024. "Measuring the risk appetite of bank-controlling shareholders: The Risk-Weighted Ownership index," Global Finance Journal, Elsevier, vol. 60(C).
    6. Álvarez-Gamboa, Javier & Cabrera-Barona, Pablo & Jácome-Estrella, Hugo, 2023. "Territorial inequalities in financial inclusion: A comparative study between private banks and credit unions," Socio-Economic Planning Sciences, Elsevier, vol. 87(PA).
    7. Umberto Maggio & Giuseppe Notarstefano & Giuseppe Terzo, 2025. "Income inequality in Italian regions: an empirical study on the mitigating role of organisation-based volunteering," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 74(2), pages 1-25, June.
    8. Cruz-García, Paula & Peiró-Palomino, Jesús, 2023. "Does bank branch density reduce income inequality in the Spanish provinces?," Finance Research Letters, Elsevier, vol. 58(PD).
    9. Arestis, Philip & Phelps, Peter, 2025. "Financial cooperatives and poverty mitigation during Brazil’s lost decade," World Development, Elsevier, vol. 191(C).
    10. Guglielmo Maria Caporale & Matteo Alessi, 2025. "Local Banking and Prosperity: Some Empirical Evidence for Italy," CESifo Working Paper Series 11926, CESifo.
    11. Philip Arestis & Peter Phelps, 2023. "Local Financial Institutions and Income Inequality: Evidence from Brazil's Credit Cooperative Movement," Development and Change, International Institute of Social Studies, vol. 54(4), pages 739-779, July.
    12. Paulo Miguel Gama & Fátima Sol Murta & Elisabete S. Vieira, 2024. "Local banking development and SME conservative financing policy. Does bank branch density matter?," Small Business Economics, Springer, vol. 63(4), pages 1747-1765, December.

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    Keywords

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    JEL classification:

    • 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
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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