Abstract

http://ssrn.com/abstract=225274
 
 

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The Political Economy of Branching Restrictions and Deposit Insurance: a Model of Monopolistic Competition Among Small and Large Banks


Nicholas Economides


New York University - Leonard N. Stern School of Business - Department of Economics

R. Glenn Hubbard


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Darius Palia


Rutgers Business School

August 1995

NBER Working Paper No. w5210

Abstract:     
This paper suggests that the introduction of bank branching restrictions and federal deposit insurance in the United States likely was motivated by political considerations. Specifically, we argue that these restrictions were instituted for the benefit of the small, unit banks that were unable to compete effectively with large, multi- unit banks. We analyze this 'political hypothesis' in two steps. First, we use a model of monopolistic competition between small and large banks to examine gains to the former group from the introduction of branching restrictions and government-sponsored deposit insurance. We then find strong evidence for the political hypothesis by examining the voting record of Congress.

Number of Pages in PDF File: 41

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Date posted: June 13, 2000  

Suggested Citation

Economides, Nicholas and Hubbard, R. Glenn and Palia, Darius, The Political Economy of Branching Restrictions and Deposit Insurance: a Model of Monopolistic Competition Among Small and Large Banks (August 1995). NBER Working Paper No. w5210. Available at SSRN: http://ssrn.com/abstract=225274

Contact Information

Nicholas Economides (Contact Author)
New York University - Leonard N. Stern School of Business - Department of Economics
44 West 4th Street
New York, NY 10012
United States
212-998-0864 (Phone)
212-995-4218 (Fax)
HOME PAGE: http://www.stern.nyu.edu/networks/
Robert Glenn Hubbard
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
HOME PAGE: http://www.gsb.columbia.edu/faculty/ghubbard

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Darius Palia
Rutgers Business School ( email )
111 Washington Street
MEC 134
Newark, NJ 07102
United States
973-353-5981 (Phone)
973-353-1233 (Fax)
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