Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States
Abstract: We assess the impact of bank deregulation on the distribution of income in the United States. From the 1970s through the 1990s, most states removed restrictions on intrastate branching, which intensified bank competition and improved bank performance. Exploiting the cross-state, cross-time variation in the timing of branch deregulation, we find that deregulation materially tightened the distribution of income by boosting incomes in the lower part of the income distribution while having little impact on incomes above the median. The results suggest that regulatory impediments to competition among banks during the 20th century were disproportionally harmful to lower income workers. We also find that the impact of bank deregulation on income inequality is accounted for by an increase in the relative wage rates and working hours of unskilled workers, and not by lower-income households financing additional education or starting new businesses.
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