Working Paper

Bank deregulation and racial inequality in America

Abstract: We use the cross-state, cross-time variation in bank deregulation across the U.S. states to assess how improvements in banking systems affected the labor market opportunities of black workers. Bank deregulation from the 1970s through the 1990s improved bank efficiency, lowered entry barriers facing nonfinancial firms, and intensified competition for labor throughout the economy. Consistent with Becker?s (1957) seminal theory of racial discrimination, we find that deregulation-induced improvements in the banking system boosted blacks?relative wages by facilitating the entry of new firms and reducing the manifestation of racial prejudices in labor markets.

Keywords: Banks and banking; Labor market; Wages; Bank competition;

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Supervisory Research and Analysis Working Papers

Publication Date: 2012

Number: RPA 12-5