What drives deregulation? Economics and politics of the relaxation of bankbranching restrictions

This paper investigates private-interest, public-interest, and political-in stitutional theories of regulatory change to analyze state-level deregulati on of bank branching restrictions. Using a hazard model, we find that inter est group factors related to the relative strength of potential winners (la rge banks and small, bank-dependent firms) and losers (small banks and the rival insurance firms) can explain the timing of branching deregulation acr oss states during the last quarter century. The same factors also explain c ongressional voting on interstate branching deregulation. While we find som e support for each theory, the private interest approach provides the most compelling overall explanation of our results.