Finance and Inequality in a Panel of US States

54 Pages Posted: 20 Nov 2019

Date Written: November 10, 2019

Abstract

We examine the impact of sector-based reform on income inequality, concentrating on state banking deregulation in the US, for which we employ annual balanced panel data from all 50 states and the District of Columbia, covering the period from 1970 to 2000, for our baseline analysis. The estimation strategy exploits the variation across states and years in the enactment of laws that remove restrictions on in-state bank branch geographical expansion and cross-state bank business operational expansion to compute the effects of developments in the financial sector on income inequality. We find evidence that inequality on average decreases with within-state branching reform, whereas it on average increases with between-state banking deregulation. Utilising five different measures of inequality (top decile income share, Atkinson index, the Gini coefficient, relative mean deviation, and Theil entropy index), we determine that our finding materially depends on which measure of income inequality is being considered. We argue that this has not been stressed in the previous literature.

Keywords: Finance, Financial sector laws, Banking deregulation, Income inequality, United States

JEL Classification: G28, O11, O16, O51

Suggested Citation

Oyekola, Olayinka, Finance and Inequality in a Panel of US States (November 10, 2019). Available at SSRN: https://ssrn.com/abstract=3484544 or http://dx.doi.org/10.2139/ssrn.3484544

Olayinka Oyekola (Contact Author)

University of Exeter INTO ( email )

Stocker Rd
Exeter, EX4 4PY
United Kingdom

HOME PAGE: http://www.olayinkaoyekola.com

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