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Access to Banking and the Role of Inequality and the Financial Crisis

Access to Banking and the Role of Inequality and the Financial Crisis AbstractWe study access to banking and how it is related to banks’ rate of return on investments and the distribution of income. We develop our empirical framework through a theoretical supply-side model of bank deposit services with a consumer population heterogeneous in income. We use this model to show how decreases in the interest rate margin and higher income disparities lead to an increase in the proportion of unbanked. Using localized US household data from 2009, 2011, 2013 and 2015 we find strong empirical evidence for the predictions of the model. We then structurally estimate our model to estimate the value of having a checking account relative to alternative financial services and to quantify the effects of actual changes in the interest rate margin and the distribution of income that occurred in the aftermath of the 2008 financial crisis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B.E. Journal of Economic Analysis & Policy de Gruyter

Access to Banking and the Role of Inequality and the Financial Crisis

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Publisher
de Gruyter
Copyright
© 2021 Mauro Caselli et al., published by De Gruyter, Berlin/Boston
ISSN
1935-1682
eISSN
1935-1682
DOI
10.1515/bejeap-2020-0421
Publisher site
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Abstract

AbstractWe study access to banking and how it is related to banks’ rate of return on investments and the distribution of income. We develop our empirical framework through a theoretical supply-side model of bank deposit services with a consumer population heterogeneous in income. We use this model to show how decreases in the interest rate margin and higher income disparities lead to an increase in the proportion of unbanked. Using localized US household data from 2009, 2011, 2013 and 2015 we find strong empirical evidence for the predictions of the model. We then structurally estimate our model to estimate the value of having a checking account relative to alternative financial services and to quantify the effects of actual changes in the interest rate margin and the distribution of income that occurred in the aftermath of the 2008 financial crisis.

Journal

The B.E. Journal of Economic Analysis & Policy – de Gruyter

Published: Oct 28, 2021

Keywords: financial exclusion; income inequality; financial crisis; alternative financial services; D11; D12; D14; D21; D22; G21

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