Research

Work in Progess

Banking Sector Deregulation and Income Inequality

This paper estimates the impact of regional banking sector integration on income inequality in the United States. Both intrastate and interstate banking deregulation are associated with reductions in income inequality. Notably, in states with more stringent banking regulations, interstate deregulation has a larger effect in reducing inequality than intrastate reforms. A potential explanation is that rent-seeking behavior was more prevalent in these highly regulated states, limiting the effectiveness of internal reforms. In contrast, opening state borders to out-of-state banks fostered greater competition and efficiency in local banking markets, contributing to a more equitable distribution of income.

Financial Openness and Income Inequality

Over the past three decades, rapid economic growth has been accompanied by a rise in income inequality across the globe. Using a large cross-country dataset, this paper investigates the key drivers of this trend. Financial liberalization—particularly inward foreign direct investment (FDI)—is found to increase income inequality by raising the demand for high-skilled labor. The impact of financial openness varies by a country’s level of development. In lower-income countries with underdeveloped financial sectors, debt inflows further exacerbate income disparities. For the lowest income groups, reductions in trade and capital restrictions have relatively limited effects on narrowing the income gap compared to other factors such as education.

Corporate Tax Break and Firm Location Choice

This paper examines the relationship between corporate tax incentives and firm relocation patterns in South Korea’s manufacturing sector. Specifically, it analyzes how tax breaks offered to domestic firms relocating from congested urban areas to designated, often less-populated, regions influence location decisions. The findings reveal a significant increase in domestic firm out-migration from cities to provincial areas following the corporate tax reform. Interestingly, foreign firms—despite not being eligible for the tax incentives—relocate at higher rates than domestic firms, potentially due to spillover effects from the relocation of domestic firms. Additionally, small and medium-sized domestic firms, although eligible for relatively larger tax benefits, are less likely to relocate compared to their larger counterparts.