Enjoying the Quiet Life under Deregulation? Evidence from Adjusted Lerner Indices for U.S. Banks

Michael Koetter, James W. Kolari and Laura Spierdijk
Additional contact information
James W. Kolari: Texas A&M University
Laura Spierdijk: University of Groningen

The Review of Economics and Statistics, 2012, vol. 94, issue 2, 462-480

Abstract: The quiet life hypothesis posits that firms with market power incur inefficiencies rather than reap monopolistic rents. We propose a simple adjustment to Lerner indices to account for the possibility of forgone rents to test this hypothesis. For a large sample of U.S. commercial banks, we find that adjusted Lerner indices are significantly larger than conventional Lerner indices and trending upward over time. Instrumental variable regressions reject the quiet life hypothesis for cost inefficiencies. However, Lerner indices adjusted for profit inefficiencies reveal a quiet life among U.S. banks. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: deregulation; rents; Lerner indices; U.S. banks (search for similar items in EconPapers)
JEL-codes: D40 G21 L1 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (244)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00155 link to full text PDF (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:94:y:2012:i:2:p:462-480

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().