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One size does not fit all. Cooperative banking and income inequality

Raoul Minetti, Pierluigi Murro () and Valentina Peruzzi ()

No 2019-10, Working Papers from Michigan State University, Department of Economics

Abstract: The re-regulation wave following the global financial crisis is putting pressure on local community and cooperative banks. In this paper, we show that cooperative banking can play a pivotal role in reducing income inequalities in local communities. By analyzing Italian local (provincial) credit markets over the 2001-2011 period, we find that cooperative banks mitigate income inequality more than their commercial counterparts. This effect remains significant when we account for the pervasiveness of relationship lending in the provinces, suggesting that it is the specific nature and orientation of cooperative banks, rather than their lending technologies, that improve income distribution. The impact of cooperative banking on inequality appears to be mainly channeled by reduced migratory flows and lower business turnover.

Keywords: Cooperative banks; income inequality; financial development (search for similar items in EconPapers)
JEL-codes: G21 G38 O15 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2019-09-24
New Economics Papers: this item is included in nep-ban, nep-eur and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:ris:msuecw:2019_010

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