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Competition, Concentration and their Relationship: an EmpiricalAnalysis of the Banking Industry

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  • J.A. Bikker
  • K. Haaf

Abstract

This paper examines competitive conditions and market structure in the banking industry, and inves- tigates their interrelationship. Competition is measured using the non-structural Panzar-Rosse model, which assesses the elasticities of interest revenues with respect to changes in banks' input prices. In order to distinguish competitive behaviour on local, national and international markets, for each coun- try, three subsamples are taken: small or local banks, medium-sized banks and large or international banks. For all 23 countries considered, estimations indicate monopolistic competition. Competition appears to be weaker in local markets and stronger in international markets. Subsequently, a relationship for the impact of the market structure on competition is derived and tested empirically, providing support for the conventional view that concentration impairs competitiveness.

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Bibliographic Info

Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 68.

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Length: 29 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:dnb:staffs:68

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Web page: http://www.dnb.nl/en/
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References

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