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Incidence of Bank Levy and Bank Market Power

Gunther Capelle-Blancard () and Olena Havrylchyk

Working Papers from CEPII research center

Abstract: This is the first analysis of the incidence of a bank tax that is imposed on banks’ balance sheets. Within the framework of an oligopolistic version of the Monti-Klein model, the pass-through of a bank tax levied on loans is stronger when elasticity of credit demand is low. To test this hypothesis, we investigate the incidence of the Hungarian bank tax that was introduced in 2010 on banks’ assets. This case is well suited for our analysis because the tax rate is much higher for large banks than for small banks, which allows relying on difference-in-difference methodology to disentangle the impact of the tax from any other shock that might have occurred simultaneously. In line with model predictions, our estimations show that the tax is shifted to customers with the smallest demand elasticity, such as households. In terms of economic policy implications, our results suggest that enhanced borrower mobility could reduce the ability of banks to shift taxes to customers.

Keywords: banks; bank levy; tax incidence; market power (search for similar items in EconPapers)
JEL-codes: G21 H22 L13 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-ban
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Related works:
Journal Article: Incidence of Bank Levy and Bank Market Power (2017) Downloads
Journal Article: Incidence of Bank Levy and Bank Market Power (2017) Downloads
Working Paper: Incidence of Bank Levy and Bank Market Power (2017)
Working Paper: Incidence of Bank Levy and Bank Market Power (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2013-21

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