State Commercial Bank Pay Structure and Industry Metrics in Response to Bank Branching Deregulation


What was the state-level impact of bank branching deregulation on metrics such as profits, bank size, bank efficiency, and bank employee compensation? Did the timing of deregulation influence its effects? In this essay, I will use the American state-by-state deregulation of bank branching restrictions that occurred between the 1970s and 1990s to analyze the effects of branching regulations on the banking industry within each state. I will use a difference-in-difference analysis of metrics including asset size, profits, income, and indicators of industry efficiency. I test my results with additional controls including state per capita GDP, if the state was a unit banking state, and others. I examine branching deregulation’s effect on workers in the industry by race, gender, and state-level banking structure, as well as the effects of a state deregulating early vs. late. I confirm that branching deregulation lowered wages of workers in commercial banking and that wages of men fell further than those of women, but I counterintuitively find that the wages of Hispanics declined by more than those of whites. I also find that bank-level metrics like asset size rise overall, but that these changes are concentrated in non-unit banking states rather than unit banking states that experienced the greatest regulatory shifts over the time period analyzed. I also construct several measures of industry efficiency and find that, by those measures, deregulation did not make the banking industry more efficient.

Cite this paper

@inproceedings{Granato2017StateCB, title={State Commercial Bank Pay Structure and Industry Metrics in Response to Bank Branching Deregulation}, author={Andrew Granato and Stephen B Haber}, year={2017} }