Handbook of Competition in Banking and Finance
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Handbook of Competition in Banking and Finance

Edited by Jacob A. Bikker and Laura Spierdijk

For academics, regulators and policymaker alike, it is crucial to measure financial sector competition by means of reliable, well-established methods. However, this is easier said than done. The goal of this Handbook is to provide a collection of state-of-the-art chapters to address this issue. The book consists of four parts, the first of which discusses the characteristics of various measures of financial sector competition. The second part includes several empirical studies on the level of, and trends in, competition across countries. The third part deals with the spillovers of market power to other sectors and the economy as a whole. Finally, the fourth part considers competition in banking submarkets and subsectors.
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Chapter 6: Global developments in banking competition

Martien Lamers and Victoria Purice

Abstract

This chapter reviews existing literature on the measurement of competition in banking, as well as its applications across different regions of the world. Starting from competition measures based on market shares such as the Herfindahl–Hirschman index, the field has by now primarily moved to the use of bank-level measures grounded in New Empirical Industrial Organization (NEIO), such as the Panzar and Rosse (1987) H-statistic and the Lerner index. Using these measures, many researchers have documented a decreasing level of competition during the last few decades in all parts of the world. We confirm this trend using the World Bank’s Global Financial Development database.

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