Financial Integration and Growth: Banks' Previous Industry Exposure Matters
Résumé
Using U.S. interstate banking deregulations, we identify the effect of banks’ prior to market-entry industry exposures on the state-level manufacturing sector growth. Examining industry value added, gross operating surplus, total compensation, number of employees, output per employee and wages, we find that the larger the discrepancy in specialization in an industry between a state-pair, the higher is the impact of banking integration on the growth of that sector in the less specialized state. Our results indicate that a banking channel shapes the states’ industrial landscape. Banks prior exposure to different sectors appears to have important consequences for regional economic integration.