Effects of State-Level Banking Deregulation on the U.S. Labor Market (Job Market Paper).

I assess the impact of staggered-in-time state-level banking deregulation on the wages and labor input responses of U.S. private sector. From 1970s through the 1990s, states elected to remove prohibitions on branching, which resulted in large structural changes on U.S. financial markets and increased local credit supply. I show that interstate banking deregulation led to increases in the growth of the real wage rate, annual incomes and annual labor supply responses, as measured by hours and weeks. I show that policy reforms lead to declines income inequality and not wage inequality. These findings suggest that the declines in income inequality due to banking deregulation came partially from increases in the quantity of labor input.

The Impact of Bank Expansion on Self-Employed Business Owners : Evidence from U.S. States. with Bulent Unel (Revision Requested at The Journal of Economic Management and Strategy)

We use state-level bank branch deregulations to study the impact of changes in credit on entrepreneurship at the individual-owner level. We classify self-employed individuals into incorporated and unincorporated business owners. Exploiting the variation in the staggered timing of banking deregulations, we find that branching reforms affected the entry and exit rates of the incorporated self-employed. Further, the branching reforms encouraged unincorporated businesses to incorporate. Finally, the effects of reforms are different across groups based on gender, race, and age. We find stronger effects on incorporated business creation among minorities, and higher exit rates among the young and minorities.

The Impact of Bankruptcy reforms on Entrepeneurship. (In Progress) with Bulent Unel

We study the effects of a major change in debt-relief policies in the United States: The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) on individual entrepreneurship. This policy reduces the amount of risk sharing between borrowers and lenders, by reducing the borrower's ability of default on debt obligations. The BAPCA reform reduced the ability of individuals to file for a chapter 7 bankruptcy, which allows borrowers to default on most outstanding debts (rather than restructure debt contracts) . We classify the self-employed into 17 industry categories and calculate measures of external finance in each sector. Our preliminary work suggests that after the passage of BAPCA, there is a decline in entry into self-employment. However, we observe relatively higher rates of entry from individuals who start businesses in industries that have high need for external finance. This finding suggests that reduction in risk sharing between borrowers and lenders leads to a lower level of entrepreneurship.