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Federal Reserve Bank of Boston
Supervisory Research and Analysis Working Papers
Bank deregulation and racial inequality in America
Ross Levine
Alexey Levkov
Yona Rubinstein
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.


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Ross Levine & Alexey Levkov & Yona Rubinstein, Bank deregulation and racial inequality in America, Federal Reserve Bank of Boston, Supervisory Research and Analysis Working Papers RPA 12-5, 2012.
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Keywords: Banks and banking ; Labor market ; Wages ; Bank competition
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