The political economy of branching restrictions and deposit insurance: A model of monopolistic competition among small and large banks

Nicholas Economides, R. Glenn Hubbard, Darius Palia

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63 Citas (Scopus)

Resumen

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.

Idioma originalEnglish
Páginas (desde-hasta)667-704
Número de páginas38
PublicaciónJournal of Law and Economics
Volumen39
N.º2
DOI
EstadoPublished - 1996

ASJC Scopus Subject Areas

  • Economics and Econometrics
  • Law

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