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Big bad banks ? the impact of U.S. branch deregulation on income distribution

  • Beck, Thorsten
  • Levine, Ross
  • Levkov, Alexey

Policymakers and economists disagree about the impact of bank regulations on the distribution of income. Exploiting cross-state and cross-time variation, the authors test whether liberalizing restrictions on intra-state branching in the United States intensified, ameliorated, or had no effect on income distribution. The analysis finds that branch deregulation lowered income inequality by affecting labor market conditions, not by boosting the business income of the poor, nor by enhancing educational attainment. Reductions in the earnings gap between men and women and between skilled and unskilled workers account for the bulk of the explained drop in income inequality.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4330.

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Date of creation: 01 Aug 2007
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Handle: RePEc:wbk:wbrwps:4330
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