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Revisiting the effect of bank deregulation on income inequality

Author

Listed:
  • William B. Hankins

    (Jacksonville State University)

  • Anna-Leigh Stone

    (Brock School of Business, Samford University)

  • Gary Hoover

    (Murphy Institute, Tulane University)

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.

Suggested Citation

  • William B. Hankins & Anna-Leigh Stone & Gary Hoover, 2024. "Revisiting the effect of bank deregulation on income inequality," Empirical Economics, Springer, vol. 66(6), pages 2625-2657, June.
    • Handle: RePEc:spr:empeco:v:66:y:2024:i:6:d:10.1007_s00181-023-02527-2
    DOI: 10.1007/s00181-023-02527-2
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    More about this item

    Keywords

    Bank deregulation; Intrastate deregulation; Interstate deregulation; Income inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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