The implications of market structure and bank efficiency on social welfare: the case of the Saudi Arabian banking system
Abdullah Almounsor and
Middle East Development Journal, 2016, vol. 8, issue 2, 329-357
This paper estimates the social costs of market power in the Saudi Arabia banking system over the period 2001–2012. It also tests the so-called Quiet Life Hypothesis, which postulates a negative effect of market power on bank management efficiency (X-efficiency), cost-efficiency and profit-efficiency. The Lerner index for all Saudi banks averaged 0.66, indicating that the Saudi Arabian Banking sector is far from being competitive. Using the Harberger’s triangle methodology, the social welfare cost attributable to market power for the whole period is estimated at 0.82% of GDP. However, the research found that market power in the Saudi banking sector is a significant determinant of bank inefficiency, thereby supporting the Quiet Life Hypothesis. The paper suggests important policy implications to improve banking competition and reduce welfare losses associated with market power.
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:taf:rmdjxx:v:8:y:2016:i:2:p:329-357
Ordering information: This journal article can be ordered from
Access Statistics for this article
Middle East Development Journal is currently edited by Lyn Squire
More articles in Middle East Development Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().