Revisiting the effect of bank deregulation on income inequality

William Hankins, Anna-Leigh Stone () and Gary Hoover
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Anna-Leigh Stone: Brock School of Business, Samford University

Empirical Economics, 2024, vol. 66, issue 6, No 10, 2625-2657

Abstract: Abstract We use recently developed difference-in-differences methodologies and a panel of US states over the period 1960–2015 to examine how bank branching deregulation impacted state-level income inequality. Existing research relying on traditional two-way fixed effects estimates and event studies provide mixed results. However, these results potentially suffer from biases due to treatment effect heterogeneity and the failure to account for multiple related treatments. Using bias-corrected difference-in-differences procedures and properly accounting for the timing of treatment, we find evidence that the combined effect of intrastate and interstate banking deregulation increased the income share of the top 10%, 5%, and 1% of income earners, respectively. Conversely, we find no evidence that intrastate branching deregulation in isolation impacted income inequality.

Keywords: Bank deregulation; Intrastate deregulation; Interstate deregulation; Income inequality (search for similar items in EconPapers)
JEL-codes: D31 G21 G38 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00181-023-02527-2

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