Finance and inequality in a panel of US States

Ọláyínká Oyèkọ́lá ()
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Ọláyínká Oyèkọ́lá: INTO University of Exeter
Authors registered in the RePEc Author Service: Olayinka Oyekola

Empirical Economics, 2021, vol. 61, issue 5, No 16, 2739-2795

Abstract: Abstract We examine the impact of sector-based reform on income inequality, concentrating on state banking deregulation in the USA, 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. Utilizing 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 (search for similar items in EconPapers)
JEL-codes: G28 O11 O16 O51 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00181-020-01976-3

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