infonet-economy

This paper provides evidence that supply-side factors significantly drive the high share of unbanked households. Using interstate branching deregulation in the U.S. after 1994 as an exogenous shock, we show that an increase in bank competition is associated with a large drop in the share of unbanked households. The effect is even stronger for populations that are more likely to be rationed by banks, such as black households living in ``high racial bias'' states. The improved access to bank accounts leads to higher savings rates but does not translate to higher levels of indebtedness.