Working Paper: NBER ID: w11006
Authors: Mark J. Garmaise; Tobias J. Moskowitz
Abstract: Using a unique sample of commercial loans and mergers between large banks, we provide microlevel (within-county) evidence linking credit conditions to economic development and find a spillover effect on crime. Neighborhoods that experienced more bank mergers are subjected to higher interest rates, diminished local construction, lower prices, an influx of poorer households, and higher property crime in subsequent years. The elasticity of property crime with respect to merger-induced banking concentration is 0.18. We show that these results are not likely due to reverse causation, and confirm the central findings using state branching deregulation to instrument for bank competition.
Keywords: Bank Mergers; Crime; Credit Market Competition
JEL Codes: G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bank mergers (G21) | Higher interest rates (E43) |
| Bank mergers (G21) | Diminished local construction (L74) |
| Bank mergers (G21) | Lower property prices (R31) |
| Bank mergers (G21) | Influx of poorer households (R23) |
| Bank mergers (G21) | Higher property crime rates (K42) |
| Decline in bank competition (F65) | Economic deterioration (F69) |
| Economic deterioration (F69) | Higher property crime rates (K42) |
| Bank mergers (G21) | Property crime (K42) |
| Bank mergers (G21) | Personal crimes (K42) |