Losing Banks, Losing People? Bank Desertification and Local Population Dynamics

This paper investigates the impact of bank desertification on population dynamics in Italian municipalities from 2001 to 2024. Using panel-data regressions and a matched staggered difference-in-differences design, the analysis finds that bank branch closures lead to population decline, with effects emerging two years after bank desertification and intensifying over time. Municipalities that lose all bank branches experience a 0.5% population decline after five years and a 2% decline after ten years. These effects are driven by a contraction of the local economy. The closure of bank branches reduces the number of local business units and employment, particularly in the business and consumer services sectors. It also implies a relevant shift in the composition of total municipal income, as the proportion of lower‑income groups increases, while that of higher‑income groups declines. These results suggest that bank desertification has broader implications beyond the financial sector, affecting regional development and the resilience of local communities. JEL Classification : G21; J10; L10; R12; R23