A New Data Set on Competition in National Banking Markets
44 Pages Posted: 13 Jun 2014
Date Written: June 2014
Abstract
We estimate the degree of competition in the banking sectors of 148 countries over the period 1997-2010 using three methods: the Lerner index, the adjusted Lerner index, and the profit elasticity. Marginal cost estimates required for all methods are obtained using a flexible semi-parametric methodology. All three indices show that competitive conditions in banking deteriorated during the period 1997-2006, improved until 2008, and deteriorated again thereafter. Levels of competition differ across regions and income groups, but there is gradual convergence over time. Banking systems in less competitive sub-Saharan Africa and low income countries and more competitive in Europe and Central and South Asia and OECD countries.
Keywords: bank competition, Lerner index, profit elasticity
JEL Classification: G21
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