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The Revolving Door and Worker Flows in Banking Regulation

  • David Lucca
  • Amit Seru
  • Francesco Trebbi

This paper traces career transitions of federal and state U.S. banking regulators from a large sample of publicly available curricula vitae, and provides basic facts on worker flows between the regulatory and private sector resulting from the revolving door. We find strong countercyclical net worker flows into regulatory jobs, driven largely by higher gross outflows into the private sector during booms. These worker flows are also driven by state-specific banking conditions as measured by local banks' profitability, asset quality and failure rates. The regulatory sector seems to experience a retention challenge over time, with shorter regulatory spells for workers, and especially those with higher education. Evidence from cross-state enforcement actions of regulators shows gross inflows into regulation and gross outflows from regulation are both higher during periods of intense enforcement, though gross outflows are significantly smaller in magnitude. These results appear inconsistent with a "quid-pro-quo" explanation of the revolving door, but consistent with a "regulatory schooling" hypothesis.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 20241.

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Date of creation: Jun 2014
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Handle: RePEc:nbr:nberwo:20241
Note: CF POL
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  1. James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc.
  2. Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 3-26, Summer.
  3. Loungani, Prakash & Rogerson, Richard, 1989. "Cyclical fluctuations and sectoral reallocation : Evidence from the PSID," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 259-273, March.
  4. 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, MIT Press, vol. 114(4), pages 1437-1467, November.
  5. Robert Shimer, 2005. "The cyclicality of hires, separations, and job-to-job transitions," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 493-508.
  6. Robert E. Hall, 2006. "Job Loss, Job Finding and Unemployment in the U.S. Economy over the Past 50 Years," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 101-166 National Bureau of Economic Research, Inc.
  7. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  8. Besley, Timothy J. & Coate, Stephen, 2000. "Elected Versus Appointed Regulators: Theory And Evidence," CEPR Discussion Papers 2381, C.E.P.R. Discussion Papers.
  9. Erhan Artu´┐Ż & Shubham Chaudhuri & John McLaren, 2010. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," American Economic Review, American Economic Association, vol. 100(3), pages 1008-45, June.
  10. Allen N. Berger & Timothy H. Hannan, 1994. "The efficiency cost of market power in the banking industry: a test of the "quiet life" and related hypotheses," Finance and Economics Discussion Series 94-36, Board of Governors of the Federal Reserve System (U.S.).
  11. David J. Salant, 1995. "Behind the Revolving Door: A New View of Public Utility Regulation," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 362-377, Autumn.
  12. Daniel Diermeier & Michael Keane & Antonio Merlo, 2002. "A Political Economy Model of Congressional Careers," PIER Working Paper Archive 04-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2004.
  13. Bruce Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series 2004-34, Board of Governors of the Federal Reserve System (U.S.).
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