Working Paper: NBER ID: w13299
Authors: Thorsten Beck; Ross Levine; Alexey Levkov
Abstract: By studying intrastate branch banking reform in the United States, this paper provides evidence that financial markets substantively influence the distribution of income. From the 1970s through the 1990s, most states removed restrictions on intrastate branching, which intensified bank competition and improved efficiency. Exploiting the cross-state, cross-time variation in the timing of bank deregulation, we evaluate the impact of liberalizing intrastate branching restrictions on the distribution of income. We find that branch deregulation significantly reduced income inequality by boosting the incomes of lower income workers. The reduction in income inequality is fully accounted for by a reduction in earnings inequality among salaried workers.
Keywords: No keywords provided
JEL Codes: D31; G28; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bank deregulation (G28) | Income distribution (D31) |
| Bank deregulation (G28) | Income opportunities for the poor (F63) |
| Bank performance (G21) | Income opportunities for the poor (F63) |
| Bank deregulation (G28) | Earnings inequality among salaried workers (J31) |
| Bank deregulation (G28) | Income inequality (D31) |
| Initial conditions related to bank performance (G21) | Effects of deregulation on income distribution (F61) |