The first essay revisits the origins of state deposit insurance in the early 20th century United States to understand why otherwise similar states responded to recurring banking panics differently. It finds that Progressivism and legislative shifts contributed to state deposit insurance adoption. Most importantly, it finds that interstate competition drove state deposit insurance legislation. First and foremost, states enacted deposit insurance to enhance the ability of their small banks to compete with insured banks in neighboring states.; The findings of the first essay, while important, do not clearly tell us what role political institutions played in the creation of deposit insurance, because American states are relatively homogenous in terms of their political institutions. For this, one needs a multi-country sample.; The second essay therefore studies the adoption of deposit insurance between 1975 and 1995 using a multi-country sample. It argues that representation of depositors' interests in the policymaking process is the key to the adoption of deposit insurance. Since the representation of interests is dependent on political institutions, deposit insurance is likely to be adopted in a country whose political institutions induce politicians to internalize depositors' interests. Depositors are a large but geographically diffuse group. Due to these characteristics, politicians face stronger incentive to internalize depositors' interests under systems of proportional representation than under majoritarian systems. There are two reasons for this. First, under majoritarian systems, politicians are less willing to represent depositors' interests, because depositors are not geographically concentrated in any given districts. (From an individual politician's point, the majority of depositors are located outside of her district.) Under PR systems, on the other hand, politicians are more willing to represent depositors, as districts are large—in some cases, a country is one district—and include more depositors. Second, parties need a larger voter coalition to win elections (larger minimal coalition) under PR systems than under majoritarian systems. Parties under PR systems therefore have a stronger incentive to create broad programs that target large groups. Event history analysis indeed demonstrates that proportional representation, along with banking crises and diffusion, explains deposit insurance adoption.; Existing studies on the effects of deposit insurance indicate that deposit insurance does not have a consistent impact on financial stability. If so, it is important to understand the effects of bank regulatory regimes, as they may be more effective—or at least, more consistent—in promoting financial stability.; The third essay examines whether some structural characteristics of bank regulatory institutions—functional separation, external interference, and fragmented authority—explain banking crises. In developed countries, neither external interference nor fragmented authority is found to affect the risk of banking crises; in developing countries, however, functional separation and political interference increase the risk of non-systemic crises. Overall, banking crises in developing countries are more explainable in terms of politics and institutions than banking crises in developed countries. (Abstract shortened by UMI.)
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