TY - JOUR
T1 - The political economy of branching restrictions and deposit insurance
T2 - A model of monopolistic competition among small and large banks
AU - Economides, Nicholas
AU - Hubbard, R. Glenn
AU - Palia, Darius
PY - 1996
Y1 - 1996
N2 - This article suggests that the introduction of bank branching restrictions and federal deposit insurance in the United States likely was motivated by political considerations. Specifically, we argue that these restrictions were instituted for the benefit of the small unit banks that were unable to compete effectively with large, multiunit banks. We analyze this "political hypothesis" in two steps. First, we use a model of monopolistic competition between small and large banks to examine gains to the former group from the introduction of branching restrictions and government-sponsored deposit insurance. We then find strong evidence for the political hypothesis by examining the voting record of Congress.
AB - This article suggests that the introduction of bank branching restrictions and federal deposit insurance in the United States likely was motivated by political considerations. Specifically, we argue that these restrictions were instituted for the benefit of the small unit banks that were unable to compete effectively with large, multiunit banks. We analyze this "political hypothesis" in two steps. First, we use a model of monopolistic competition between small and large banks to examine gains to the former group from the introduction of branching restrictions and government-sponsored deposit insurance. We then find strong evidence for the political hypothesis by examining the voting record of Congress.
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U2 - 10.1086/467362
DO - 10.1086/467362
M3 - Article
AN - SCOPUS:0030525134
SN - 0022-2186
VL - 39
SP - 667
EP - 704
JO - Journal of Law and Economics
JF - Journal of Law and Economics
IS - 2
ER -