Are Public Banks pro-Competitive? Evidence from Concentrated Local Markets in Brazil

Christiano A. Coelho, Joao Manoel Pinho De Mello and Leonardo Bandeira Rezende
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Christiano A. Coelho: Central Bank of Brasil

No 551, Textos para discussão from Department of Economics PUC-Rio (Brazil)

Abstract: We measure the competitive effect of public ownership of banks in concentrated local banking markets in Brazil by extending Bresnahan and Reiss’s [1991] framework to measure the effects of entry in concentrated markets. We use variation in market size, the number of competitors and their identity to infer how conduct is affected by the entry of a private vis-à-vis a public bank. We find that, while local markets whose structure is private bank duopoly are 100% larger than private monopolies, duopolies with one public and one private bank and private monopolies are no different with respect to market size. These results suggest that, while the presence of private banks toughens competition, public banks do not affect conduct.

Keywords: banking industry; public versus private ownership; effect of entry. (search for similar items in EconPapers)
JEL-codes: L10 L13 L33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-com, nep-eff, nep-ind and nep-mic
Date: 2007-08, Revised 2007-09
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Persistent link: http://EconPapers.repec.org/RePEc:rio:texdis:551

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