Abstract
In this paper we seek to contribute to the literature on competition and
innovation by focusing on individual firms within the U.S. banking industry in the
period 1984-2004. We measure innovation by estimating technology gaps and find
evidence of an inverted-U relationship between competition and the technology gaps in banking. This finding is robust over several different specifications and is
consistent with theoretical and empirical work by Aghion, Bloom, Blundell, Griffith,
and Howitt (2005b). The optimal amount of innovation requires a slightly positive
mark up. Also, we find that the U.S. banking industry as a whole has consolidated
beyond this optimal innovation level and that state-level interstate banking
deregulation has lowered innovation.
innovation by focusing on individual firms within the U.S. banking industry in the
period 1984-2004. We measure innovation by estimating technology gaps and find
evidence of an inverted-U relationship between competition and the technology gaps in banking. This finding is robust over several different specifications and is
consistent with theoretical and empirical work by Aghion, Bloom, Blundell, Griffith,
and Howitt (2005b). The optimal amount of innovation requires a slightly positive
mark up. Also, we find that the U.S. banking industry as a whole has consolidated
beyond this optimal innovation level and that state-level interstate banking
deregulation has lowered innovation.
| Original language | English |
|---|---|
| Place of Publication | Utrecht |
| Publisher | UU USE Tjalling C. Koopmans Research Institute |
| Number of pages | 26 |
| Publication status | Published - 2009 |
Publication series
| Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
|---|---|
| No. | 16 |
| Volume | 09 |
| ISSN (Electronic) | 2666-8238 |
Keywords
- competition
- innovation
- stochastic frontier analysis
- technology gap ratio
- banking