Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271258 
Year of Publication: 
2022
Series/Report no.: 
QMS Research Paper No. 2022/03
Publisher: 
Queen's University Belfast, Queen's Management School, Belfast
Abstract: 
We estimate a structural profit model for 956 matched pairs of US credit unions and commercial banks, using the results to examine how the subsidies associated with credit unions' income tax exemptions and non-profit status are allocated across various stakeholders. We find economically large profit inefficiencies at credit unions relative to banks—a little more than half of which is supported by their tax subsidy, but over 90 percent of which is passed through to credit union members as above-market deposit interest rates. Given extensive evidence collected elsewhere that credit union members tend to earn above-average incomes, our results indicate a serious misalignment between the legislation that establishes the credit union mission (a tax exemption in exchange for meeting the credit and savings needs of consumers, especially those of modest means) and the actual performance of credit unions under that legislation.
Subjects: 
Commercial banks
credit unions
profit inefficiency
tax exempt status
JEL: 
G21
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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