Working Paper: NBER ID: w28582
Authors: Yan Ji; Songyuan Teng; Robert Townsend
Abstract: We propose a model with local spatial markets and heterogeneous agents to understand and evaluate the geographic expansion of bank branches after banking deregulation in Thailand. The model features heterogeneity in financial frictions across regions, with the costs of accessing credit and deposits depending on the distance from the nearest branch. Disciplined by micro estimates of the effects of branch openings, the model reproduces salient regional and aggregate patterns concerning occupational choice, financial access, and inequality. We apply the model to study two counterfactual financial sector policies in distant markets, one subsidizing branches and the other subsidizing household deposits.
Keywords: bank expansion; financial access; inequality; spatial growth; Thailand
JEL Codes: C54; E23; E44; F43; O11; O16; R11; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| subsidy for branches (H20) | income inequality (D31) |
| subsidy for households (H53) | income inequality (D31) |
| credit channel (E51) | changes in local income (F61) |
| credit channel (E51) | income inequality (D31) |
| branch openings (G21) | local market income (F61) |
| branch openings (G21) | local employment (J68) |
| branch openings (G21) | credit access (G21) |
| branch openings (G21) | firm entry (M13) |
| branch openings (G21) | costs of accessing credit and deposits (G21) |
| costs of accessing credit and deposits (G21) | demand for interest-bearing deposits (E41) |