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Changes in Twelfth District local banking market structure during a period of industry consolidation

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  • Elizabeth S. Laderman

Abstract

A main public policy concern regarding the massive consolidation of the banking industry between 1984 and 2003 is the consolidation's potential effect on competition in local banking markets. Examining this period for the Twelfth Federal Reserve District, I find, on the whole, moderate increases in concentration in urban markets and decreases in concentration in rural markets, although a number of local markets have shown large increases in concentration to high levels. However, consistent with antitrust enforcement and competition, I find negative and highly statistically significant effects of concentration on the long-run change in concentration and, for high enough levels of initial concentration, actual decreases in concentration.

Suggested Citation

  • Elizabeth S. Laderman, 2005. "Changes in Twelfth District local banking market structure during a period of industry consolidation," Economic Review, Federal Reserve Bank of San Francisco, pages 15-27.
  • Handle: RePEc:fip:fedfer:y:2005:p:15-27
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    File URL: http://www.frbsf.org/economic-research/publications/economic-review/2005/laderman.pdf
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    References listed on IDEAS

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    1. Stephen A. Rhoades, 1992. "Evidence on the size of banking markets from mortgage loan rates in twenty cities," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 117-118.
    2. Berger, Allen N & Hannan, Timothy H, 1989. "The Price-Concentration Relationship in Banking," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 291-299, May.
    3. Dean F. Amel & Martha Starr-McCluer, 2001. "Market definition in banking: recent evidence," Finance and Economics Discussion Series 2001-16, Board of Governors of the Federal Reserve System (U.S.).
    4. Stephen A. Rhoades, 1992. "Evidence on the size of banking markets from mortgage loan rates in twenty cities," Staff Studies 162, Board of Governors of the Federal Reserve System (U.S.).
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