Bank deregulation and racial inequality in America

We use the cross-state, cross-time variation in bank deregulation across the U.S. states to assess how improvements in banking systems a§ected the labor market opportunities of black workers. Bank deregulation from the 1970s through the 1990s improved bank e¢ ciency, lowered entry barriers facing nonÖnancial Örms, and intensiÖed competition for labor throughout the economy. Consistent with Beckerís (1957) seminal theory of racial iscrimination, we Önd that deregulation-induced improvements in the banking system boosted blacksírelative wages by facilitating the entry of new Örms and reducing the manifestation of racial prejudices in labor markets.