Banking structural reforms and top income shares: regulate or deregulate?

Abstract

Abstract This article investigates if, and to what extent, banking structural reforms may affect the top income shares over time. Canada and Italy are used as case studies, as both countries undertook a major deregulation and liberalization process within their banking sector in the early 1990s. These banking policies aimed at privatizing the banking sector and reintroducing the quasi universal banking model. The evaluation of these policy packages is undertaken by implementing the Synthetic Control Method. Findings point out, overall, a robust and substantial increase of some of the top income shares in both countries, over the post-deregulation period. This work contributes by also identifying the main potential mechanisms—both direct and indirect—via which banking deregulation might have operated.