The Distributional Impact of Local Banking. Evidence from the Financial and Sovereign-Debt Crises

This paper investigates whether local cooperative banks mitigated income inequality in Italian municipalities after the two main crises that characterized the European landscape between 2008 and 2015, i.e. the financial and sovereign-debt crises. Estimation results reveal that, although in the post-crisis periods income inequality increased, this increase was lower in municipalities with at least one cooperative bank branch. The same result, that is a mitigation of income inequality, is not found for non-cooperative banks. Also the size of the cooperative banking system mattered after the crises: where cooperative banks extended more loans and collected more deposits income inequality was lower. The distributional impact of cooperative banks after the two crises was particularly relevant in small municipalities, and where the level of industrial and financial development was higher