Rising Bank Concentration
P. Dean Corbae () and
Pablo D'Erasmo ()
No 594, Staff Report from Federal Reserve Bank of Minneapolis
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: Imperfect competition; Banking industry dynamics; Bank concentration (search for similar items in EconPapers)
JEL-codes: E44 L11 G21 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-com and nep-mac
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Journal Article: Rising bank concentration (2020)
Working Paper: Rising Bank Concentration (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:87574
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