Abstract
Abstract The growth of the American financial services remains a bit of a puzzle. The standard approach, the deregulation hypothesis, posits that the industry expanded in response to national deregulation. Yet, when viewed in a comparative context, US finance was deregulated significantly less than other national financial systems and yet grew significantly more than most. We propose the global deregulation hypothesis as a solution to this puzzle. The hypothesis posits that American finance grew in response to deregulation in Europe and the emerging market economies. The article develops two theoretical mechanisms that link global deregulation to US financialization. It reports statistical tests that support two central implications of the global deregulation hypothesis. First, global deregulation is positively associated with the growth of US financial services, while US deregulation is not. Second, global deregulation is not systematically related to the growth of financial services in other industrial democracies.
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