Branching of Banks and Union Decline

QAU Working Paper No. QAU10-7
by Alexey Levkov

This paper proposes a novel explanation for the decline in unions in the United States since the late 1970s: state-by-state removal of geographical restrictions on branching of banks. Bank branch deregulation reduces union membership in the non-banking sectors by intensifying entry of new firms, especially in sectors with high dependence on external finance. New firm entry, in turn, is associated with a reduction in union wage premium, and subsequently leads to adverse union voting. I provide empirical evidence for these channels using repeated cross-sectional and panel data of U.S. workers and union representation election outcomes.

(Revise and resubmit to Journal of Labor Economics.)

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