Contestability, Technology and Banking
We estimate the effect of internet penetration on retail bank margins in the euro area. Based on an adapted Baumol  type contestability model, we argue that the internet has reduced sunk costs and therefore increased contestability in retail banking. We test this conjecture by estimating the model using semi-aggregated data for a panel of euro area countries. We utilise time series and cross-sectional variation in internet penetration. We find support for an increase in contestability in deposit markets, and no effect for loan markets. The paper suggests that for time and savings deposits, the presence of brick and mortar bank branches may no longer be of first order importance for the assessment of the competitive structure of the market.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: L 7,1; D - 68161 Mannheim|
Web page: http://www.zew.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
- Hannan, Timothy H & Berger, Allen N, 1991. "The Rigidity of Prices: Evidence from the Banking Industry," American Economic Review, American Economic Association, vol. 81(4), pages 938-45, September.
- J.A. Bikker & K. Haaf, 2000.
"Competition, concentration and their relationship: an empirical analysis of the banking industry,"
Research Series Supervision (discontinued)
30, Netherlands Central Bank, Directorate Supervision.
- Bikker, Jacob A. & Haaf, Katharina, 2002. "Competition, concentration and their relationship: An empirical analysis of the banking industry," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2191-2214, November.
- J.A. Bikker & K. Haaf, 2001. "Competition, Concentration and their Relationship: an EmpiricalAnalysis of the Banking Industry," DNB Staff Reports (discontinued) 68, Netherlands Central Bank.
- Reint Gropp & Anil K Kashyap, 2010.
"A New Metric for Banking Integration in Europe,"
in: Europe and the Euro, pages 219-246
National Bureau of Economic Research, Inc.
- Reint Gropp & Anil Kashyap, 2009. "A New Metric for Banking Integration in Europe," NBER Working Papers 14735, National Bureau of Economic Research, Inc.
- Gropp, Reint & Kashyap, Anil K., 2008. "A New Metric for Banking Integration in Europe," ZEW Discussion Papers 08-102, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Boone, J., 2004.
"A New Way to Measure Competition,"
2004-004, Tilburg University, Tilburg Law and Economic Center.
- Corvoisier, Sandrine & Gropp, Reint, 2001.
"Bank Concentration and Retail Interest Rates,"
Working Paper Series
0072, European Central Bank.
- Allen N. Berger & Robert DeYoung, 2002.
"Technological progress and the geographic expansion of the banking industry,"
Finance and Economics Discussion Series
2002-31, Board of Governors of the Federal Reserve System (U.S.).
- Berger, Allen N. & DeYoung, Robert, 2006. "Technological Progress and the Geographic Expansion of the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1483-1513, September.
- Allen N. Berger & Robert DeYoung, 2002. "Technological progress and the geographic expansion of the banking industry," Working Paper Series WP-02-07, Federal Reserve Bank of Chicago.
- Morrison, Steven A & Winston, Clifford, 1987. "Empirical Implications and Tests of the Contestability Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 53-66, April.
- De Bandt, Olivier & Davis, E. Philip, 2000. "Competition, contestability and market structure in European banking sectors on the eve of EMU," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1045-1066, June.
- Vesala, Jukka, 1995. "Testing for competition in banking : Behavioral evidence from Finland," Scientific Monographs, Bank of Finland, number 1995_001, September.
- Berger, Allen N, 1995. "The Profit-Structure Relationship in Banking--Tests of Market-Power and Efficient-Structure Hypotheses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 404-31, May.
- Reint Gropp & Christoffer Kok & Jung-Duk Lichtenberger, 2014.
"The Dynamics of Bank Spreads and Financial Structure,"
Quarterly Journal of Finance (QJF),
World Scientific Publishing Co. Pte. Ltd., vol. 4(04), pages 1450014-1-1.
- Gropp, Reint & Kok, Christoffer & Lichtenberger, Jung-Duk, 2007. "The dynamics of bank spreads and financial structure," Working Paper Series 0714, European Central Bank.
- Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
- Besanko, David & Thakor, Anjan V., 1992. "Banking deregulation: Allocational consequences of relaxing entry barriers," Journal of Banking & Finance, Elsevier, vol. 16(5), pages 909-932, September.
- Allen N. Berger, 2002.
"The economic effects of technological progress: evidence from the banking industry,"
Finance and Economics Discussion Series
2002-50, Board of Governors of the Federal Reserve System (U.S.).
- Berger, Allen N, 2003. " The Economic Effects of Technological Progress: Evidence from the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 141-76, April.
When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:7532. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.