Rising bank concentration
Date
2020-12
Authors
D'Erasmo, Pablo
relationships.isContributorOfPublication
Corbae, Dean
Journal Title
Journal ISSN
Volume Title
Publisher
Universidad de San Andrés. Departamento de Economía
Abstract
Concentration of insured deposit funding among the top four commercial banks in the U.S.
has risen from 15% in 1984 to 44% in 2018, a roughly three-fold increase. Regulation has
often been attributed as a factor in that increase. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 removed many of the restrictions on opening bank branches
across state lines. We interpret the Riegle-Neal act as lowering the cost of expanding a bank's
funding base. In this paper, we build an industry equilibrium model in which banks
endogenously climb a funding base ladder. Rising concentration occurs along a transition
path between two steady states after branching costs decline.
Description
Fil: D'Erasmo, Pablo. Universidad de San Andrés. Departamento de Economía; Argentina.