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The Evolution of Banking Competition in Italian Credit Markets Using a Profit Elasticity Approach

Author

Listed:
  • Michele Benvenuti

    (Banca d’Italia, Head of the Bolzano Branch)

  • Silvia Del Prete

    (Banca d’Italia, Firenze Branch, Regional Economic Research Division)

Abstract

As in other industries, competition in credit markets is potentially beneficial to efficiency and social welfare. Unfortunately, measuring such competition is a complex task, affected by entry barriers, product substitutability, and concentration effects. We adopt a recent approach, the Profit Elasticity Index, in order to assess the significant changes in the Italian loan market over the period 1994–2013. Our main findings suggest that, in that period, deregulation and M &A activity were associated with an increase in the extent of competition, while, during the financial crisis, banking competition declined. Moreover, mutual banks faced relatively less competitive local markets, and banking competition was heterogeneous across Italian macro-regions.

Suggested Citation

  • Michele Benvenuti & Silvia Del Prete, 2025. "The Evolution of Banking Competition in Italian Credit Markets Using a Profit Elasticity Approach," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 11(1), pages 361-402, March.
    • Handle: RePEc:spr:italej:v:11:y:2025:i:1:d:10.1007_s40797-023-00233-7
    DOI: 10.1007/s40797-023-00233-7
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    More about this item

    Keywords

    Banking competition; Financial crisis; Local credit markets; Profit elasticity;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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