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Competition Tests with a Non-Structural Model: the Panzar-Rosse Method Applied to Germany's Savings Banks

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  • Horst Gischer
  • Mike Stiele

Abstract

In this paper we adopt the Panzar-Rosse approach to assess the competitive conditions in the German banking market for the period from 1993 to 2002. We suggest several improvements to the empirical application of the approach and show that frequently used empirical models that apply price rather than revenue functions lead to biased results. Using disaggregated annual data from more than 400 savings banks (Sparkassen) the empirical findings indicate monopolistic competition, the cases of monopoly and perfect competition are strongly rejected. Furthermore, small banks seem to enjoy even more market power than larger institutions. Copyright 2008 The Authors. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd. 2008.

Suggested Citation

  • Horst Gischer & Mike Stiele, 2009. "Competition Tests with a Non-Structural Model: the Panzar-Rosse Method Applied to Germany's Savings Banks," German Economic Review, Verein für Socialpolitik, vol. 10, pages 50-70, February.
  • Handle: RePEc:bla:germec:v:10:y:2009:i::p:50-70
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Samuel Fosu, 2013. "Banking Competition in Africa: Sub-regional Comparative Studies," Discussion Papers in Economics 13/12, Department of Economics, University of Leicester, revised Jun 2013.
    2. Horst Gischer & Peter Reichling, 2010. "The German Banking System and the Financial Crisis," Chapters,in: The Financial and Economic Crises, chapter 4 Edward Elgar Publishing.
    3. Moch, Nils, 2013. "Competition in fragmented markets: New evidence from the German banking industry in the light of the subprime crisis," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2908-2919.
    4. Nabiyev, Javid & Musayev, Kanan & Yusifzada, Leyla, 2016. "Banking Competition and Financial Stability: Evidence from CIS," MPRA Paper 72167, University Library of Munich, Germany.
    5. Memić Deni, 2015. "Banking Competition and Efficiency: Empirical Analysis on the Bosnia and Herzegovina Using Panzar-Rosse Model," Business Systems Research, De Gruyter Open, vol. 6(1), pages 72-92, March.
    6. Alexander Erler & Horst Gischer & Bernhard Herz, 2017. "Regional Competition in US Banking – Trends and Determinants," FEMM Working Papers 170008, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    7. Cavid Nabiyev & Kanan Musayev & Leyla Yusifzada, 2016. "Banking Competition and Financial Stability: Evidence from CIS Countries," Working Papers 1604, Central Bank of Azerbaijan Republic.
    8. Fosu, Samuel, 2013. "Banking competition in Africa: Subregional comparative studies," Emerging Markets Review, Elsevier, vol. 15(C), pages 233-254.

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