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Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States


  • Beck is from CentER, Department of Economics and EBC, Tilburg University; Levine is with the Brown University and NBER; Levkov is with The Federal Reserve Bank of Boston. Martin Goetz and Carlos Espina provided exceptional research assistance. We thank an anonymous referee, the Editors, Phil Strahan, and Yona Rubinstein for detailed comments on earlier drafts. We received many helpful comments at the Bank of Israel, Board of Governors of the Federal Reserve System, Brown University, Boston University, International Monetary Fund, European Central Bank, Georgia State University, New York University, Tilburg University, Vanderbilt University, University of Frankfurt, University of Lausanne, University of Mannheim, University of Virginia, and the World Bank. We are grateful to the Charles G. Koch Charitable Foundation for providing financial support. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Boston or the Federal Reserve System.


We assess the impact of bank deregulation on the distribution of income in the United States. From the 1970s through the 1990s, most states removed restrictions on intrastate branching, which intensified bank competition and improved bank performance. Exploiting the cross-state, cross-time variation in the timing of branch deregulation, we find that deregulation materially tightened the distribution of income by boosting incomes in the lower part of the income distribution while having little impact on incomes above the median. Bank deregulation tightened the distribution of income by increasing the relative wage rates and working hours of unskilled workers.