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Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States

47 Pages Posted: 12 Jun 2009 Last revised: 8 Feb 2010

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Ross Levine

UC Berkeley; National Bureau of Economic Research (NBER)

Alexey Levkov

Brown University - Department of Economics

Date Written: December 22, 2009

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. Bank deregulation tightened the distribution of income by increasing the relative wage rates and working hours of unskilled workers.

Keywords: Financial Institutions, Government Policy and Regulation, Income Inequality

JEL Classification: G28, G21, D31

Suggested Citation

Beck, Thorsten and Levine, Ross and Levkov, Alexey, Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States (December 22, 2009). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1415502

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Ross Eric Levine (Contact Author)

UC Berkeley ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Alexey Levkov

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

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