Geographic Deregulation of Banking and Economic Growth

State-level U.S. data for 1965 through 1994 are used to test for the effect of bank deregulation on economic growth. In particular, this study tests whether intrastate branch and interstate bank deregulation, measured by the activities of banks and bank holding companies, expedites growth in real per capita income through its effect on the size of banking markets. The empirical analysis supports the hypothesis that such deregulation enhances short-run economic growth.