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Rising Bank Concentration

P. Dean Corbae () and Pablo D'Erasmo ()

No 26838, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E44 G21 L11 L13 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-ban, nep-com, nep-ind and nep-mac
Note: CF EFG IO ME
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Published as Dean Corbae & Pablo D’Erasmo, 2020. "Rising Bank Concentration," Journal of Economic Dynamics and Control

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