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Are Public Banks pro-Competitive? Evidence from Concentrated Local Markets in Brazil

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Author Info

  • Christiano A. Coelho

    (Central Bank of Brasil)

  • João Manoel Pinho de Mello

    ()
    (Department of Economics, PUC-Rio)

  • Leonardo Rezende

    ()
    (Department of Economics, PUC-Rio)

Abstract

We measure the competitive effect of public ownership of banks in concentrated local banking markets in Brazil by extending Bresnahan and Reiss’s [1991] framework to measure the effects of entry in concentrated markets. We use variation in market size, the number of competitors and their identity to infer how conduct is affected by the entry of a private vis-à-vis a public bank. We find that, while local markets whose structure is private bank duopoly are 100% larger than private monopolies, duopolies with one public and one private bank and private monopolies are no different with respect to market size. These results suggest that, while the presence of private banks toughens competition, public banks do not affect conduct.

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Bibliographic Info

Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 551.

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Length: 31p
Date of creation: Aug 2007
Date of revision: Sep 2007
Handle: RePEc:rio:texdis:551

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Keywords: banking industry; public versus private ownership; effect of entry.;

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References

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  1. Bresnahan, T.F & Reiss, P.C., 1989. "Entry And Competition In Concentrated Markets," Papers 151, Stanford - Studies in Industry Economics.
  2. Bresnahan, Timothy F & Reiss, Peter C, 1990. "Entry in Monopoly Markets," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 531-53, October.
  3. Richard K. Crump & V. Joseph Hotz & Guido W. Imbens & Oscar A. Mitnik, 2006. "Moving the Goalposts: Addressing Limited Overlap in Estimation of Average Treatment Effects by Changing the Estimand," Working Papers 0608, University of Miami, Department of Economics.
  4. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
  5. Michael J. Mazzeo, 2002. "Product Choice and Oligopoly Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 221-242, Summer.
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Cited by:
  1. De Mello Joao M & Zilberman Eduardo, 2008. "Does Crime Affect Economic Decisions? An Empirical Investigation of Savings in a High-Crime Environment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-28, December.
  2. Guerra, Alexandre & Moita, Rodrigo, 2011. "Entradas e Bandeiras: A Estratégia de Interiorização das Cadeias de Fast Food no Brasil," Insper Working Papers wpe_247, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.

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