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Rising bank concentration

Dean Corbae and D’Erasmo, Pablo
Authors registered in the RePEc Author Service: Pablo N. D'Erasmo ()

Journal of Economic Dynamics and Control, 2020, vol. 115, issue C

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.

Keywords: Banking industry dynamics; Imperfect competition; Bank concentration (search for similar items in EconPapers)
JEL-codes: E44 G21 L11 L13 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Rising Bank Concentration (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:115:y:2020:i:c:s0165188920300464

DOI: 10.1016/j.jedc.2020.103877

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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