A smooth difference-in-differences model for assessing gradual policy effects: Revisiting the impact of banking deregulation on income distribution

A smooth difference-in-differences (smooth DID) method is proposed to revisit the effects of banking deregulation in the United States on income distribution. This simpler nonlinear DID model includes a smooth transition function (STF) to determine gradual policy effects on treatment groups. Based on economic implications and a series of tests, the impact of bank deregulation on gradually reducing income inequality is confirmed.

Automated summary

A smooth difference-in-differences (smooth DID) method is proposed to examine the effects of banking deregulation on income distribution in the United States. The findings confirm that bank deregulation gradually reduces income inequality.