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Banking privatization and market structure in Brazil: a dynamic structural analysis

Author

Listed:
  • Fabio Sanches
  • Daniel Silva Junior
  • Sorawoot Srisuma

Abstract

This article examines the effects of bank privatization on the number of bank branches operating in small isolated markets in Brazil. We estimate a dynamic game played between Brazilian public and private banks. We find private banks compete with each other as expected. We also find public banks generate positive spillovers for private banks. Our counterfactual study shows that privatization substantially reduces the number of banks. The government can mitigate the effects of privatization by providing subsidies to private banks. Our model predicts subsidy policies that reduce operating costs are more cost‐effective than entry costs for isolated markets in Brazil.

Suggested Citation

  • Fabio Sanches & Daniel Silva Junior & Sorawoot Srisuma, 2018. "Banking privatization and market structure in Brazil: a dynamic structural analysis," RAND Journal of Economics, RAND Corporation, vol. 49(4), pages 936-963, December.
    • Handle: RePEc:bla:randje:v:49:y:2018:i:4:p:936-963
    DOI: 10.1111/1756-2171.12257
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    Cited by:

    1. Junlong Chen & Chaoqun Sun & Ruiyu He & Yibing Zhang & Jiali Liu, 2023. "Optimal nationalization policy in a heterogeneous mixed oligopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 807-827, March.
    2. Ogura, Yoshiaki, 2020. "Intensified lending competition and search-for-yield under prolonged monetary easing," Journal of the Japanese and International Economies, Elsevier, vol. 56(C).
    3. Fang, Francis Haoyu & Vlaicu, Razvan, 2024. "Local Banking Supply and Private Firm Activity: Evidence from Branch Closures," IDB Publications (Working Papers) 13645, Inter-American Development Bank.
    4. Gustavo Joaquim & Bernardus Van Doornik & José Renato Ornelas, 2019. "Bank Competition, Cost of Credit and Economic Activity: evidence from Brazil," Working Papers Series 508, Central Bank of Brazil, Research Department.
    5. Yoshiaki Ogura, 2019. "Search-for-Yield under Prolonged Monetary Easing and Aging," Working Papers e142, Tokyo Center for Economic Research.

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