Innovation, Deregulation, and the Life Cycle of a Financial Service Industry

Fumiko Hayashi, Grace Li and Zhu Wang

No 15-8, Working Paper from Federal Reserve Bank of Richmond

Abstract: This paper examines innovation, deregulation, and fi rm dynamics over the life cycle of the U.S. ATM and debit card industry. In doing so, we construct a dynamic equilibrium model to study how a major product innovation (introducing the new debit card function) interacted with banking deregulation drove the industry shakeout. Calibrating the model to a novel data set on ATM network entry,exit, size, and product offerings shows that our theory fits the quantitative pattern of the industry well. The model also allows us to conduct counterfactual analyses to evaluate the respective roles that innovation and deregulation played in the industry evolution.

JEL-codes: G2 L10 O30 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2015-07-20
New Economics Papers: this item is included in nep-ban, nep-com, nep-dge, nep-ino and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Innovation, Deregulation, and the Life Cycle of a Financial Service Industry (2017)
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