Abstract

Financial institutions in the United States have historically discriminated against Black Americans in a multitude of ways. One potential dynamic of unequal access that remains understudied is geographic in nature. That is, are commercial banks less likely to locate in neighborhoods with more Black people? Using a fixed effects and selection on observables model, I find that a 1 percentage point increase in an area’s Black population is related to a 0.11 decrease in the number of commercial banks in that area. This effect is localized primarily in urban areas, particularly in cities in the Mid-Atlantic, Upper Midwest, and Pacific Coast regions. I also find that this disparity between whiter and Blacker neighborhoods has reversed and widened since 2000. In 2000, a 1 percentage point increase in an area’s Black population was associated with 0.19 more banks; by 2020, an increase in the Black population of the same magnitude was related to 0.14 percent fewer banks. These results suggest that bank closures and relocations in the aftermath of the Great Recession disproportionately affected Black neighborhoods. More broadly, policymakers should expand the scope of what banking discrimination entails, even if my results do not reveal a specific policy prescription that could undo this disparity.