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Ethnicity, Banking and Local Economic Development: Evidence from Ethiopia

Author

Listed:
  • Dereje Regasa
  • David Fielding
  • Helen Roberts

Abstract

A unique dataset is used to uncover one mechanism generating regional and ethnic inequality in Ethiopia. Individual banks’ location decisions depend on the degree of similarity between the ethnic composition of each locality and the ethnic composition of the bank’s board of directors. Using ethnic similarity as an instrument for bank location and climate as an instrument for economic development, we model both local banking provision and local economic development. Our model predicts that if the ethnic composition of all boards reflected the national population, then banks would have an incentive to operate in a wider range of locations.

Suggested Citation

  • Dereje Regasa & David Fielding & Helen Roberts, 2022. "Ethnicity, Banking and Local Economic Development: Evidence from Ethiopia," Journal of African Economies, Centre for the Study of African Economies, vol. 31(5), pages 409-440.
    • Handle: RePEc:oup:jafrec:v:31:y:2022:i:5:p:409-440.
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    File URL: http://hdl.handle.net/10.1093/jae/ejab028
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    More about this item

    Keywords

    Ethiopia; banking; local economic development; JEL classification: G21; J15; O16;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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