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Bank Concentration and Schumpeterian Growth: Theory and International Evidence

Author

Listed:
  • Boubacar Diallo

    (Qatar University)

  • Wilfried Koch

    (University of Quebec in Montreal and CIRPÉE)

Abstract

This paper investigates the relationship between economic growth and bank concentration. We introduce imperfect competition within the banking system according to the Schumpeterian growth paradigm, and we theoretically and empirically show that the effects of bank concentration on economic growth depend on the proximity to the world technology frontier. The theory predicts that when a country reaches a sufficient level of financial development, bank concentration has a negative effect on development and growth and that this effect increases when the country approaches the frontier. However, for countries with credit constraints, growth depends on only financial intermediation.

Suggested Citation

  • Boubacar Diallo & Wilfried Koch, 2018. "Bank Concentration and Schumpeterian Growth: Theory and International Evidence," The Review of Economics and Statistics, MIT Press, vol. 100(3), pages 489-501, July.
    • Handle: RePEc:tpr:restat:v:100:y:2018:i:3:p:489-501
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    Citations

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    Cited by:

    1. Edgar A. Ghossoub & Andre Harrison & Robert R. Reed, 2024. "Banking concentration, financial openness, and financial development," Contemporary Economic Policy, Western Economic Association International, vol. 42(1), pages 120-159, January.
    2. Kim, Jun Sung & Lee, Jongkwan, 2019. "The role of intergenerational mobility in internal migration," Economic Modelling, Elsevier, vol. 81(C), pages 1-15.
    3. Leon Zolotoy & Don O’Sullivan & Keke Song, 2021. "The Role of Ethical Standards in the Relationship Between Religious Social Norms and M&A Announcement Returns," Journal of Business Ethics, Springer, vol. 170(4), pages 721-742, May.
    4. Duqi, Andi & McGowan, Danny & Onali, Enrico & Torluccio, Giuseppe, 2021. "Natural disasters and economic growth: The role of banking market structure," Journal of Corporate Finance, Elsevier, vol. 71(C).
    5. Boikos, Spyridon & Bournakis, Ioannis & Christopoulos, Dimitris & McAdam, Peter, 2023. "Financial reforms and innovation: A micro–macro perspective," Journal of International Money and Finance, Elsevier, vol. 132(C).
    6. Soldatos, Gerasimos, 2018. "A discussion of joint bank and industry concentration," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 14(2), February.
    7. Roberto Bonfatti & Luis A. Bryce Campodonico & Luigi Pisano, 2018. "Reconciling the original Schumpeterian Model with the observed inverted-U relationship between competition and innovation," Discussion Papers 2018-03, University of Nottingham, GEP.
    8. Kai Lessmann & Matthias Kalkuhl, 2024. "Climate Finance Intermediation: Interest Spread Effects in a Climate Policy Model," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 11(1), pages 213-251.
    9. Alberto Bucci & Boubacar Diallo & Simone Marsiglio, 2023. "On The Nonlinearity of the Finance and Growth Relation: the Role of Human Capital," CEIS Research Paper 567, Tor Vergata University, CEIS, revised 20 Nov 2023.
    10. Li, Shengfeng & Han, Liang & Mi, Biao, 2024. "The effects of banking market structure on corporate cash holdings and the value of cash," Journal of Empirical Finance, Elsevier, vol. 75(C).
    11. Mittal, Amit & Garg, Ajay Kumar, 2018. "Bank stocks inform higher growth – A System GMM analysis of ten emerging markets in Asia," MPRA Paper 98253, University Library of Munich, Germany.
    12. Erin H. Kao & Ho-Chuan Huang & Hung-Gay Fung & Xiaojian Liu, 2020. "Co-opted directors, gender diversity, and crash risk: evidence from China," Review of Quantitative Finance and Accounting, Springer, vol. 55(2), pages 461-500, August.
    13. Boubacar Diallo, 2016. "Financial dependence and growth during crises: when does bank efficiency really matter?," Economics Bulletin, AccessEcon, vol. 36(4), pages 2491-2505.
    14. Senay Agca & Pablo Slutzky & Stefan Zeume, 2021. "Anti-Money Laundering Enforcement, Banks, and the Real Economy," Working Papers 2021-20, The George Washington University, Institute for International Economic Policy.

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