Political Competition and the Spread of Banking in Turkey, 1961-2016
PhD Job Market Talk.
Abstract: Based on the theory of political cycles, politicians of the governing party can manipulate policy tools to stimulate economy in order to be re-elected. Can strategic selection of locations and the timing of the public branch openings turn into a political opportunity for the politicians? This is a question that we face in many countries where public-sector banking exists. I explore this question through the lens of Turkey by studying the role of political competition on the allocation of public bank branches. I use a large data set of number of bank branches for 188 banks and 14 nationwide elections for 81 cities for the period 1961-2016. Building on a difference-in-differences strategy that exploits the greater influence of politics produces better state-provided financial services. Cities that were won by lower margin of victory are more likely to enjoy increase in the number of state-owned bank branches in the year before the coming elections. By highlighting the role of delivering financial services with high public visibility to win votes in elections, this study adds political angle to the literature explaining the financialization through bank branching.