Big bad banks?

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U.S. financial history has been dominated by the debate on how to regulate banks. A recent paper shows that branch deregulation in the U.S. lowered income inequality. Perhaps even more interesting and relevant for the policy debate, deregulation lowered income inequality by affecting labor market conditions, not by boosting the business income of the poor, nor by enhancing their educational attainment.

So, it seems that it is not through expanding access to finance by the poor, but rather through indirect effects that financial deepening reduces income inequality, at least in the U.S.


Bob Cull

Lead Economist, DEC

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