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Estimating the Lerner index for the banking industry: a stochastic frontier approach

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  • Paolo Coccorese

Abstract

In this article we estimate individual banks' Lerner indices for a large group of countries in the years 1994--2012 by means of the econometric method proposed by Kumbhakar et al. (2012), which is based on the stochastic frontier methodology. We then compare our results with those of existing studies on market power in the banking industry, in order to check the general consistency of the empirical evidence and thus provide some appraisal on this novel technique as well as a sketch on the strengths that may advise its use.

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  • Paolo Coccorese, 2014. "Estimating the Lerner index for the banking industry: a stochastic frontier approach," Applied Financial Economics, Taylor & Francis Journals, vol. 24(2), pages 73-88, January.
    • Handle: RePEc:taf:apfiec:v:24:y:2014:i:2:p:73-88
    DOI: 10.1080/09603107.2013.866202
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    References listed on IDEAS

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    1. Inessa Love & María Soledad Martínez Pería, 2015. "How Bank Competition Affects Firms' Access to Finance," The World Bank Economic Review, World Bank, vol. 29(3), pages 413-448.
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    3. Anzoategui Diego & Martinez Peria Maria S. & Rocha Roberto R, 2010. "Bank Competition in the Middle East and Northern Africa Region," Review of Middle East Economics and Finance, De Gruyter, vol. 6(2), pages 26-48, November.
    4. Kaushik Bhattacharya, 2003. "How good is the BankScope database? A cross-validation exercise with correction factors for market concentration measures," BIS Working Papers 133, Bank for International Settlements.
    5. Anginer, Deniz & Demirguc-Kunt, Asli & Zhu, Min, 2012. "How does bank competition affect systemic stability ?," Policy Research Working Paper Series 5981, The World Bank.
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