Rising Bank Concentration [report]

Dean Corbae, Pablo D'Erasmo
2020 unpublished
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
more » ... ustry 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 Classification Numbers: E44, G21, L11, L13.
doi:10.3386/w26838 fatcat:hcraxv63wfcf5f37j5y32ng2xa