Dynamic Bank Expansion: Spatial Growth, Financial Access, and Inequality

61 Pages Posted: 9 Mar 2021 Last revised: 3 Oct 2023

See all articles by Yan Ji

Yan Ji

Hong Kong University of Science & Technology (HKUST)

Songyuan Teng

Yale University, Department of Economics, Students

Robert M. Townsend

Massachusetts Institute of Technology (MIT)

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Date Written: November 24, 2022

Abstract

We propose a model with local spatial markets and heterogeneous agents to understand and evaluate the geographic expansion of bank branches after banking deregulation in Thailand. The model features heterogeneity in financial frictions across regions, with the costs of accessing credit and deposits depending on the distance from the nearest branch. Disciplined by micro estimates of the effects of branch openings, the model reproduces salient regional and aggregate patterns concerning occupational choice, financial access, and inequality. We apply the model to study two counterfactual financial sector policies in distant markets, one subsidizing branches and the other subsidizing household deposits.

Keywords: financial inclusion, spatial equilibrium, regional heterogeneity, growth and inequality, transitional dynamics

JEL Classification: C54, E23, E44, F43, O11, O16, R11, R13

Suggested Citation

Ji, Yan and Teng, Songyuan and Townsend, Robert M., Dynamic Bank Expansion: Spatial Growth, Financial Access, and Inequality (November 24, 2022). HKUST Business School Research Paper No. 2021-009 (also appears in Emerging Finance and Financial Practices eJournal), Available at SSRN: https://ssrn.com/abstract=3776153 or http://dx.doi.org/10.2139/ssrn.3776153

Yan Ji (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Songyuan Teng

Yale University, Department of Economics, Students ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Robert M. Townsend

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

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