Banking Deserts," City Size, and Socioeconomic Characteristics in Medium and Large U.S. Cities

TL;DR

This study analyzes banking deserts across 319 large U.S. cities, revealing that the prevalence of banking deserts is not strongly linked to socioeconomic factors or city population, and varies regionally.

Contribution

It provides a large-scale, comparative analysis of banking deserts across many cities, highlighting regional differences and challenging assumptions about socioeconomic correlates.

Findings

Banking deserts are not strongly correlated with poverty or racial composition.

The share of banking deserts is independent of city population size.

Outside the Northeast, non-desert areas tend to be poorer than deserts.

Abstract

A lack of financial access, which is often an issue in many central-city U.S. neighborhoods, can be linked to higher interest rates as well as negative health and psychological outcomes. A number of analyses of "banking deserts" have also found these areas to be poorer and less White than other parts of the city. While previous research has examined specific cities, or has classified areas by population densities, no study to date has examined a large set of individual cities. This study looks at 319 U.S. cities with populations greater than 100,000 and isolates areas with fewer than 0.318 banks per square mile based on distances from block-group centroids. The relative shares of these "deserts" appears to be independent of city population across the sample, and there is little relationship between these shares and socioeconomic variables such as the poverty rate or the percentage of Black residents. One plausible explanation is that only a subset of many cities' poorest, least White block groups can be classified as banking deserts; nearby block groups with similar socioeconomic characteristics are therefore non-deserts. Outside of the Northeast, non-desert areas tend to be poorer than deserts, suggesting that income- and bank-poor neighborhoods might not be as prevalent as is commonly assumed.