Working Paper

Branching of banks and union decline

Abstract: This paper proposes a novel explanation for the decline in unions in the United States since the late 1970s: state-by-state removal of geographical restrictions on branching of banks. Bank branch deregulation reduces union membership in the non-banking sectors by intensifying entry of new firms, especially in sectors with high dependence on external finance. New firm entry, in turn, is associated with a reduction in union wage premium, and subsequently leads to adverse union voting. I provide empirical evidence for these channels using repeated cross-sectional and panel data of U.S. workers and union representation election outcomes.

Keywords: Branch banks; Labor unions;

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Supervisory Research and Analysis Working Papers

Publication Date: 2010

Number: QAU10-7