International Economics Seminar Series: Banks in Space with Esteban Rossi-Hansberg

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At the Center for Business and Public Policy’s most recent International Trade Seminar, Esteban Rossi-Hansberg, professor of economics at the University of Chicago, presented a paper titled “Banks in Space,” a joint work with co-authors Ezra Oberfield, Nicholas Trachter, and Derek Wenning.

The paper explores how banking deregulation in the 1980s and 90s transformed the spatial distribution of U.S. banks. The key research question asks how and why large banks expanded geographically in this period – and what drove small banks to exit or shift location.

Using data on bank branches and financial fundamentals, the authors document that large banks initially concentrated in dense, investment-rich areas but were heavily reliant on expensive wholesale funding due to a lack of deposits. Over time, these large banks expanded into less dense, deposit-abundant areas, aiming to better balance their loan and deposit portfolios and reduce their dependence on wholesale funds. This shift not only facilitated their growth but also altered the competitive landscape of banking across the country. It led to reduced spatial sorting across the banking sector and greater consumer access to top-tier banking services, even in smaller markets.

While the paper does not assess welfare impacts directly, it lays the groundwork for future research into how spatial deregulation may have influenced consumer welfare and the broader financial system.

The International Trade Seminar Series convenes leading economists and researchers to present frontier work on international trade theory and empirics. The series emphasizes rigorous methodological approaches and novel data applications to advance understanding of trade dynamics, firm behavior, and policy implications in a globalized economy. Its goal is to foster scholarly exchange and inform evidence-based trade policymaking.