TY  - JOUR
AU  - Economides,Nicholas
AU  - Hubbard,R. Glenn
AU  - Palia,Darius
TI  - The Political Economy of Branching Restrictions and Deposit Insurance:  A Model of Monopolistic Competition among Small and Large Banks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5210
PY  - 1996
Y2  - December 1996
UR  - http://www.nber.org/papers/w5210
L1  - http://www.nber.org/papers/w5210.pdf
N1  - Author contact info:
Nicholas Economides
Stern School
NYU
40 West Fourth Street
New York, NY 10012
E-Mail: neconomi@stern.nyu.edu

R. Glenn Hubbard
Graduate School of Business
Columbia University, 101 Uris Hall
3022 Broadway
New York, NY  10027
Tel: 212/854-3493
Fax: 212/864-6184
E-Mail: rgh1@columbia.edu, ws2187@columbia.edu

Darius Palia
Thomas A. Renyi Chair in Banking
Department of Finance & Economics
Rutgers Business School
Room 1142, 1 Washington Park
Newark, NJ 07102
Tel: 973/353-5981
Fax: 973/353-1233
E-Mail: dpalia@rci.rutgers.edu
AB  - This paper 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, multi- unit 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.
ER  -