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Market Power and Market Structure: An Analysis of Costa Rican Banking since 2008

Author

Listed:
  • Miguel Cantillo

    (Universidad de Costa Rica)

  • José Cascante

    (Carlos III University)

  • Guillermo Pastrana

    (Toulouse School of Economics)

Abstract

This paper analyzes the evolution of the Lerner index for Costa Rican banks between 2008 and 2019. We document a significant drop in market power during this period, which we relate to less concentration in loans and deposits. The market became less consolidated as a fringe of 29 small banks gained market share at the expense of large and medium banks. We find that for individual banks, a greater market share of loans, and greater loan specialization are related to higher profitability, while a greater market share of deposits and greater size are related to lower profit margins.

Suggested Citation

  • Miguel Cantillo & José Cascante & Guillermo Pastrana, 2022. "Market Power and Market Structure: An Analysis of Costa Rican Banking since 2008," Working Papers 202202, Universidad de Costa Rica, revised Mar 2022.
    • Handle: RePEc:fcr:wpaper:202202
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    File URL: https://economia.ucr.ac.cr/sites/default/files/2022-03/EE%20UCR%20SDT%2022-02.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Banking structure; Latin American banking sector; Market power; Imperfect competition; Lerner index; Umbrella pricing.;
    All these keywords.

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