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Abstract:
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The City of Chicago is attempting to move low-income individuals and families into the financial mainstream. As a result, policy-makers in Chicago have promoted the idea that currency exchanges are bad while banks and credit unions are good. Several officials have even made the claim that currency exchanges are targeting low-income communities in order to earn above-average profits (Neely 2007). Other officials argue that the solution is simply providing incentives to banks to locate in low-income neighborhoods. Beside the fact that several studies suggest currency exchanges are locating in middle class neighborhoods, not low-income areas, and that banks have not responded to previous incentives, it is important to understand why currency exchanges exist, and why they and banks locate where they do in the city (Navigant 2008). To address this issue, this study will analyze 2000 Census data and data from the Illinois Department of Financial and Professional Regulation to better understand financial institutions in the City of Chicago. This study will test the widely-held assumption in this literature that the average income of a neighborhood determines the prevalence of currency exchanges and banks (Navigant 2008). It will show that many more factors besides average income contribute to the location of these financial institutions. It will also demonstrate that income does not influence where currency exchanges locate in the way that much of the literature suggests. |