Geographical segmentation of US capital markets

Demographic variation in savings behavior can be exploited to provide evidence on segmentation in US bank loan markets. Cities with a large fraction of seniors have higher volumes of bank deposits. Since many banks rely heavily on deposit financing, this affects local loan supply and economic activity. I show a positive effect of local deposit supply on local outcomes, including the number of firms, the number of manufacturing firms, and the number of new firms started. The effect is stronger in industries that are heavily dependent on external finance. The deregulation of intrastate branching reduced the effect of local deposit supply by approximately a third.