capital management in mutual financial institutions abstract capital management by mutual financial institutions such as credit unions provides a valuable testing ground for assessing the impact of capital regulation and theories of managerial behaviour in financial institutions limited access to external equity capital means that capital accumulation must be met primarily by reliance on retained earnings to deal with shocks to the capital position and avoid breaching regulatory requirements managers will aim to have a buffer of capital in excess of the regulatory minimum moreover mutual governance arrangements and an absence of capital market discipline mean that managers have discretion to set target capital ratios which differ significantly from industry averages this paper develops a formal model of capital management and risk management in mutual financial institutions such as credit unions which reflects these industry characteristics the model is tested using data from larger credit unions in australia which have been subject to the basel accord risk weighted capital requirements since 1993 the data supports the hypothesis that credit unions manage their capital position by setting a short term target profit rate return on assets which is positively related to asset growth and which is aimed at gradually removing discrepancies between the actual and desired capital ratio desired capital ratios vary significantly across credit unions there is little evidence of short run adjustments to the risk of the asset portfolio to achieve a desired capital position

market structure and market outcomes in deregulated rail freight markets abstract using cross section data on a national sample of city pair markets for rail freight i examine correlations between prices quantities and the number of single line and interline firms serving markets i estimate the reduced form of a structural model in which rail rates and quantities depend on the number of firms i find that rates increase as the number of firms serving the market falls and quantities shipped rise as the number of firms falls the result is consistent with market power for rail freight shippers that causes markups to rise when fewer firms serve the market and is not consistent with other explanations of the relationship between number of firms and rates and quantities interline shipment is much more costly than single line suggesting that mergers may be desirable even if they exacerbate market power problems

two sample nonparametric estimation of intergenerational income mobility in the united states and sweden we estimate intergenerational income mobility in the us and sweden using a new nonparametric approach the approach addresses several empirical issues raised in the literature and applies when other estimators are infeasible we argue that previous estimates of income mobility conceal the heterogeneous nature of the transmission mechanism by keeping mobility constant across families the striking differences we find between mobility patterns across family backgrounds captured by father s education lead us to question the conventional result that intergenerational transmission of earnings is weaker in sweden than in the united states for important parts of the population

bank regulation and risk taking incentives an international comparison of bank risk abstract this paper uses a panel database of 251 banks in 36 countries to analyze the impact of bank regulation on bank charter value and risk taking after controlling for deposit insurance and for the quality of a country s contracting environment the results indicate that regulatory restrictions increase banks risk taking incentives by reducing their charter value banks in countries with stricter regulation have a lower charter value which increases their incentives to follow risky policies these results corroborate a negative relation between regulatory restrictions and the stability of a banking system deposit insurance has a positive influence on bank charter value mitigating the risk shifting incentives it creates this positive influence disappears when we control for the possible endogeneity of deposit insurance

regulatory fog the role of information in regulatory persistence abstract regulation is very persistent even when inefficient we propose an explanation for regulatory persistence based on regulatory fog the phenomenon by which regulation obscures information regarding the value of counterfactual policies we construct a dynamic model of regulation in which the underlying need for regulation varies stochastically and regulation undermines the social planner s ability to observe the state of the world compared to a full information benchmark regulation is highly persistent often lasting indefinitely regulatory fog is robust to a broad range of partially informative policies and can be quite detrimental to social welfare regulatory experiments modeled as costly and imperfect signals of the underlying state do not eliminate the effects of regulatory fog we characterize their effects and provide a framework for choosing amongst a set of potential regulatory experiments

theories of bank behavior under capital regulation abstract this paper reviews academic studies of bank capital regulation in an effort to evaluate the intellectual foundation for the imposition of the basel i and basel ii systems of risk based capital requirements the theoretical literature yields general agreement about the immediate effects of capital requirements on bank lending and loan rates and the longer term impacts on bank ratios of equity to total or risk adjusted assets this literature produces highly mixed predictions however regarding the effects of capital regulation on asset risk and overall safety and soundness for the banking system as a whole thus the intellectual foundation for the present capital regulation regime is not particularly strong the mixed conclusions in the academic literature on banking certainly do not provide unqualified support for moving to an even more stringent and costly system of capital requirements these widely ambiguous results do suggest however that assessing the implications of capital regulation for balance sheet risk and monitoring effort in diverse banking systems is an important agenda for future theoretical research in the banking area

the intergenerational earnings and income mobility of canadian men evidence from longitudinal income tax data our objective is to obtain an accurate estimate of the degree of intergenerational income mobility in canada we use income tax information on about 400 000 father son pairs and find intergenerational earnings elasticities to be about 0 2 earnings mobility tends to be slightly greater than income mobility but nonparametric techniques uncover significant nonlinearities in both of these relationships intergenerational earnings mobility is greater at the lower end of the income distribution than at the upper end and displays an inverted v shape elsewhere intergenerational income mobility follows roughly the same pattern but is much lower at the very top of the income distribution

financial contagion and depositor monitoring this paper analyzes market discipline in a many bank economy where contagion and bank runs interact we present a model with differently informed depositors where those depositors that are more informed have incentives to monitor banks investments it is shown that when banks are undercapitalized and the probability of success of the risky asset is low depositors might prefer a contract that is subject to bank runs in the interim period to a contract that allows banks to gamble with their funds and maintain their investment the results of the paper emphasize the benefits of private monitoring of banks in order to promote market discipline

how bank capital buffers vary across countries the influence of cost of deposits market power and bank regulation abstract this paper analyzes the bank and country determinants of capital buffers using a panel data of 1337 banks in 70 countries between 1992 and 2002 after controlling for adjustment costs and the endogeneity of explanatory variables the results show that capital buffers are positively related to the cost of deposits and bank market power although the relations vary across countries depending on regulation supervision and institutions their impact is the result of two generally opposing effects restrictions on bank activities and official supervision reduce the incentives to hold capital buffers by weakening market discipline but at the same time they promote higher capital buffers by increasing market power institutional quality has the two opposite effects better accounting disclosure and less generous deposit insurance however have a clear positive effect on capital buffers by both strengthening market discipline and making charter value better able to reduce risk taking incentives

trends in intergenerational income mobility previous studies of recent u s trends in intergenerational income mobility have produced widely varying results partly because of large sampling errors by making more efficient use of the available information in the panel study of income dynamics we generate more reliable estimates of the recent time series variation in intergenerational mobility our results which pertain to the cohorts born between 1952 and 1975 do not reveal major changes in intergenerational mobility

market discipline financial crisis and regulatory changes evidence from indonesian banks abstract following the 1997 1998 financial crisis indonesian banks experienced major regulatory changes including the adoption of the blanket guarantee scheme bgs in 1998 a limited guarantee lg in 2005 and changes in capital regulation in 1998 and 2001 we examine the impact of these regulatory changes on market discipline during the period 1995 2009 the price of deposits is used to measure market discipline in a dynamic panel data methodology on a sample of 104 commercial banks we find a weakening of market discipline following the introduction of the bgs the result is consistent with the deposit insurance scheme being credible in the lower capital requirement environment the adoption of lg in a recovering economy also mitigates the role of market discipline however market discipline is more pronounced in listed banks than unlisted banks and in foreign banks than domestic banks these results have important implications for banking regulation and supervision particularly during a crisis period

banks buffer capital how important is risk abstract most banks hold a capital to asset ratio well above the required minimum defined by the present capital adequacy regulation basel i using bank level panel data from norway important hypotheses concerning the determination of this buffer capital are analyzed focus is on the importance of i risk ii the buffer as an insurance iii the competition effect iv supervisory discipline and v economic growth a negative or non significant risk effect is found which suggests that introducing a more risk sensitive capital regulation basel ii is likely to affect norwegian banks support is found for the hypothesis that buffer capital serves as an insurance against failure to meet the capital requirements

deposit insurance regulation and moral hazard in the thrift industry evidence from the 1930 s this paper compares risk taking of insured and uninsured thrifts operating under strict and less strict regulatory regimes during the 1930 s analysis of balance sheet data indicates that while newly insured thrifts undertook less risk than their uninsured counterparts possibly because of screening by deposit insurance authorities moral hazard emerged gradually insured institutions operating under relatively permissive regulatory regimes were more prone to undertake risky lending activities than their more tightly regulated counterparts possibly because of screening by deposit insurance authorities moral hazard emerged gradually insured institutions operating under relatively premissive regulatory regimes were more prone to undertake risky lending activities than their more tightly regulated counterparts given the current system of deposit insurance the results suggest that effective regulation and supervision will play a key role in maintaining thrift stability in the 1990s copyright 1992 by american economic association

does deposit insurance increase banking system stability an empirical investigation based on evidence of 61 countries in 1980 97 the authors find that explicit deposit insurance tends to be detrimental to bank stability the more so where bank interest rates are deregulated and the institutional environment is weak the adverse impact of deposit insurance on bank stability tends to be stronger the more extensive is the coverage offered to depositors and where the scheme is funded and run by the government rather than the private sector

local intergenerational mobility abstract using nlsy data we investigate whether the observed patterns of economic mobility as measured by income and educational attainment exhibit heterogeneity across socioeconomic groups and whether the nature of the heterogeneity can be explained by different levels of persistence in the intergenerational transmission of cognitive and non cognitive abilities across these groups in doing so we employ the varying coefficient model vcm to estimate nonparametric local measures of intergenerational mobility of those outcome variables by local we mean that the persistence coefficients are modeled as smooth functions of log parental permanent income our findings show that intergenerational mobility exhibits nonlinear patterns individuals with different parental income are characterized by different degrees of intergenerational mobility moreover we find evidence that suggests cognitive abilities play a role in explaining intergenerational mobility these findings provide some support for a new class of family investment models that emphasize the role of such abilities in economic mobility

fortunate sons new estimates of intergenerational mobility in the united states using social security earnings data previous studies relying on short term averages of fathers earnings have estimated the intergenerational elasticity ige in earnings to be approximately 0 4 due to persistent transitory fluctuations these estimates have been biased down by approximately 30 or more using administrative data containing the earnings histories of parents and children the ige is estimated to be around 0 6 this suggests that the united states is substantially less mobile than previous research indicated estimates of intergenerational mobility are significantly lower for families with little or no wealth offering empirical support for theoretical models that predict differences due to borrowing constraints

risk in banking and capital regulation this paper investigates the role of bank capital regulation in risk control it is known that banks choose portfolios of higher risk because of inefficiently priced deposit insurance bank capital regulation is a way to redress this bias toward risk utilizing the mean variance model the following results are shown a the use of simple capital ratios in regulation is an ineffective means to bound the insolvency risk of banks b as a solution to problems of the capital ratio regulation the theoretically correct risk weights under the risk based capital plan are explicitly derived and c the theoretically correct risk weights are restrictions on asset composition which alters the optimal portfolio choice of banking firms the recent increase in bank failures especially after the 1980 and 1982 deregulatory acts has again ignited a controversy over the risk portfolio of the banking industry given the importance of this sector there has been increased scrutiny of the industry s motives for risk taking and possible regulatory changes to improve its stability these investigations have centered around two rather complementary areas the first of these is the role of deposit insurance and how its current pricing procedure encourages risk taking and justifies current bank regulations the works of buser chen and kane 4 kane 9 and benston et al 2 have made substantive contributions the authors demonstrates the way in which our current fixed rate insurance system rewards risk taking by the firm and insulates it through deposit insurance from the market discipline that needs to exist to ensure proper risk evaluation this realization has led these authors to propose a series of regulatory changes to encourage proper portfolio choice within the industry these include a shift to market value accounting risk based deposit insurance premiums and additional capital regulation the last of these serves as a method of coinsurance whereby higher capital levels require the bank to absorb greater losses in the event of failure and encourage additional prudence in management in essense it is one method of risk reduction that may offset the risk preference imposed on the industry due to the inappropriate insurance pricing because the amount of capital influences the probability of bank insolvency and thus the soundness of the entire banking system the regulators ceteris paribus prefer more capital to

the cyclical behaviour of european bank capital buffers using an unbalanced panel of accounting data from 1997 to 2004 and controlling for individual bank costs and risk we find capital buffers of the banks in the eu15 have a significant negative co movement with the cycle for banks in the accession countries there is significant positive co movement capital buffers of commercial and savings banks and of large banks exhibit negative co movement those of co operative and smaller banks exhibit positive co movement speeds of adjustment are fairly slow we interpret these results and discuss policy implications noting that negative co movement of capital buffers will exacerbate the pro cyclical impact of basel ii

bank capital and liquidity creation in asia pacific we calculate liquidity creation for a large sample of commercial banks in 14 asia pacific economies from 2005 to 2012 we find that banks in this region created 7 83 trillion in liquidity in 2012 or approximately 3 24 times the total liquidity created in 2005 large banks and those based in developing asia created the highest liquidity we also investigate the bicausal relationship between liquidity creation and regulatory capital and find that the trade off between the benefits of financial stability induced by enhanced capital requirements and those of higher liquidity creation is applicable to all of the sample banks regardless of bank size and economic region

bank capital regulation in a barrier option framework abstract the barrier options theory of corporate security valuation is applied to the contingent claims of a regulated bank the regulator insurer of a bank owns a down and in call option on the bank assets which can be balanced against the expected coverage cost raising the regulatory barrier critical asset level triggering bank closure leads to a transfer of wealth from stockholders to the insurer and reduces stockholder incentives to increase asset risk empirical tests on a sample of 152 one bank holding companies show that regulatory barriers are priced in the stock market and are inversely related to tier 1 leverage ratios

excess liquidity bank pricing rules and monetary policy abstract this paper studies the implications of excess bank liquidity for the effectiveness of monetary policy in a simple model with credit market imperfections the demand for excess reserves is determined by precautionary factors and the opportunity cost of holding cash it is argued that excess liquidity may impart greater stickiness to the deposit rate in response to a monetary contraction and induce an easing of collateral requirements on borrowers which in turn may translate into a lower risk premium and lower lending rates as a result asymmetric bank pricing behavior under excess liquidity may hamper the ability of a contractionary monetary policy to lower inflation

comment on what drives bank competition some international evidence the question of bank competition is vitally important for a number of reasons the essential role of bank credit and other financial services as an input in the production of most other goods and services places banks in a unique and influential position such that any allocative inefficiency or other market distortions in banking are almost certain to be felt throughout the economy moreover recent history has provided numerous instances where the textbook paradigm of atomistic competition has proven inadequate as a policy guide for efficient banking either because there are simply too few banks to rely on sheer numbers as a guarantee of vigorous competition as in canada or because of evidence that there can be such a thing as too much competition in banking as suggested by several studies or because of instances where nearly competitive pricing has been observed in markets containing only one or two banks or because conversely substantially noncompetitive pricing has sometimes been deduced in banking products such as credit cardswith thousands of suppliers thus the study of bank competition remains an urgent field of research claessens and laeven 2004 this issue of jmcb make two key contributions here first they extend a proven empirical method to an unprecedentedly large and varied crosscountry sample second they offer the logical and policy relevant additional step of seeking to identify factors associated with variations in measured conduct this step is needed to assess the empirical validity of the traditional structure conductperformance paradigm in their sample and is especially important where that paradigm is found lacking as a predictor of bank conduct indeed although the authors

the cyclical effects of the basel ii capital requirements abstract capital requirements play a key role in the supervision and regulation of banks the basel committee on banking supervision is in the process of changing the current framework by introducing risk sensitive capital charges some fear that this will unduly increase the volatility of regulatory capital furthermore by limiting the banks ability to lend capital requirements may exacerbate an economic downturn the paper examines the problem of capital induced lending cycles and their pro cyclical effect on the macroeconomy in greater detail it finds that the capital buffer that banks hold on top of the required minimum capital plays a crucial role in mitigating the impact of the volatility of capital requirements

bank size and risk taking under basel ii this paper discusses the relationship between bank size and risk taking under pillar i of the new basel capital accord using a model with imperfect competition and moral hazard we find that small banks and hence small borrowers may profit from the introduction of an internal ratings based irb approach if this approach is applied uniformly across banks however the banks right to choose between the standardized and the irb approaches unambiguously hurts small banks who are pushed towards higher risk taking due to fiercer competition this may even lead to higher aggregate risk in the economy

capital requirements and the behaviour of commercial banks abstract i study the consequences of capital regulations on the portfolio choices of commercial banks elaborating on previous work by kareken and wallace 1978 koehn and santomero 1980 and kim and santomero 1988 i obtain the following results if the objective of commercial banks is maximization of the market value of their future profits value maximizing banks capital regulations cannot prevent banks from choosing very specialized and very risky portfolios risk based insurance premia are in fact the relevant instrument for that purpose on the other hand if banks behave as portfolio managers utility maximizing banks capital regulations can be effective but only if the weights used in the computation of the ratio are proportional to the systematic risks of the assets their betas because of limited liability of commercial banks a minimum capital regulation or a closing rule may become necessary as well to prevent failing banks from betting for resurrection

a reexamination of mean variance analysis of bank capital regulation abstract the mean variance framework has been used to analyze the effects of bank capital regulation on the asset and bankruptcy risk of insured utility maximizing banks this literature claims that more stringent capital regulation will increase asset risk and can increase bankruptcy risk these conclusions are notable because they are opposite to those obtained for insured value maximizing banks in this paper we show that the utility maximization literature does not support its conclusions regarding the effects of bank capital regulation because it has mischaracterized the bank s investment opportunity set by neglecting the option value of deposit insurance

life cycle variations in the association between current and lifetime income replication and extension for sweden we apply haider and solon s generalized errors in variables model to swedish income tax data to produce estimates of the association between current and lifetime income our estimates demonstrate strong life cycle patterns this implies that the widespread use of current income as a proxy for lifetime income leads to inconsistent parameter estimates i e life cycle bias even when the proxy is used as the dependent variable estimates for comparable cohorts of swedish and american men demonstrate surprising similarities there are however significant gender and cohort differences in this association that lead to statistically significant and quantitatively meaningful differences in life cycle biases

snapshots versus movies empirical studies of the intergenerational inheritance of economic status should use observations on complete lifetime status profiles of parents and children to be consistent with underlying theory but they cannot only snapshots rather than movies on status are currently available in samples estimates of the degree of intergenerational inheritance may therefore be subject to lifecycle biases the paper investigates these in the context of a lifecycle earnings model and shows that these biases may be large that their direction varies and that correction methods suggested hitherto have questionable reliability until more complete data sets become available researchers should be more temperate in the conclusions they draw

a nonparametric nonclassical measurement error approach to estimating intergenerational mobility elasticities this article provides a framework for estimating intergenerational mobility elasticities iges of children s income with respect to parental income we allow the iges to be heterogeneous by leavi

deposit insurance and subsidized recapitalizations the 2007 2009 financial crisis saw a vast expansion in deposit insurance guarantees around the world and yet our understanding of the design and consequences of deposit insurance schemes is in its infancy we provide a new rationale for the provision of deposit insurance in our model the banking sector exhibits both adverse selection and moral hazard which implies that the social benefits of bank monitoring must for incentive reasons be shared between depositors and banks consequently socially too few deposits are made in equilibrium deposit insurance or equivalently bank recapitalization corrects this market failure we find that deposit insurance should be funded not by banks or depositors but out of general taxation the optimal level of deposit insurance varies inversely with the quality of the banking system hence when the soundness of the financial sector is uncertain governments should consider supporting deposit insurance schemes and undertaking subsidized recapitalizations

wage differentials of transportation industries deregulation versus regulation this article investigates the wage differentials of similar occupations in three for hire transportation carrier industries railroad truck and motor bus under regulation and deregulation the estimation results indicate that the union wage gaps among all occupations have widened under deregulation specifically the union wages of railroad occupations have increased relative to those of truck drivers and the union wages of truck drivers have increased relative to those of motor bus drivers further wage gaps for all occupations for this period are greater among nonunion than among union workers jel l92 i introduction economic regulation of u s transportation carrier industries has been classified into three distinct eras the monopoly regulatory era the competition regulatory era and the regulatory reform era beginning in the late 1800s the 1930s and the 1970s talley 1983 these eras addressed carrier abuses destructive intramodal and intermodal competition and the negative impacts of regulation respectively the 1887 interstate commerce act sought to prevent monopolistic abuses and limit discriminatory practices of railroads the motor carrier act of 1935 of the competition regulatory era placed motor carriers freight and passenger under federal regulation by the 1970s advocates for federal regulatory reform argued that economic regulation protected inefficient carriers promoted high rates and fares and in general fostered an inefficient allocation of resources subsequently a number of deregulation or regulatory reform acts were passed including the railroad revitalization and regulatory reform act of 1976 the staggers rail act of 1980 the motor carrier act of 1980 and the bus regulatory reform act of 1982 though shippers and passengers have generally benefited from transportation deregulation paying lower real rates and fares the impact on carrier labor earnings has been negative for example the real weekly wages of union railroad engineers have declined 11 7 talley and schwarz miller 1998 the real hourly wages of union and nonunion for hire truck carrier drivers have declined 23 and 10 hirsch and macpherson 1998 and the real hourly wages of both union and nonunion for hire motor bus carrier drivers have declined 17 schwarz miller and talley 1994 the impact of deregulation however on the relative labor earnings of transportation carrier industries is unknown specifically have wage differentials changed from those of the regulation period if so have these differentials widened narrowed under deregulation thereby increasing decreasing the gap in the labor earnings of one industry relative to those of another do the changes in wage differentials differ for union and nonunion labor the purpose of this article is to investigate occupational wage differentials among transportation industries under regulation and deregulation as intermodal competition intensifies such information is expected to play a more important role in industry wage negotiations wage differentials of similar occupations in three for hire carrier industries under regulation and deregulation are estimated the three industries are the railroad truck and motor bus industries and the occupations include railroad engineers conductors and brakemen switchmen truck drivers and motor bus drivers the estimation results indicate that the union wages of railroad occupations have increased relative to those of truck drivers and the union wages of truck drivers have increased relative to those of motor bus drivers during the postderegulation period further wage gaps for all occupations for this period are greater among nonunion than among union workers the remainder of this article is structured as follows section ii discusses railroad truck and motor bus for hire carrier industries and in particular their labor under regulation and deregulation

intergenerational income mobility among daughters new evidence on daughters intergenerational mobility in a framework that encompasses women not in the labor force using broader measures of economic status than just the women s own earnings is presented and the role of husbands earnings is highlighted a parallel analysis of sons mobility is performed intergenerational transmission of income status may be weaker for daughters than for sons but is still quite substantial assortative mating is an important element in the intergenerational transmission process

the impact of international information disclosure requirements on market discipline abstractfinancial regulators are challenged with finding the most efficient and effective ways to monitor banks given an expanding and complex international financial system market discipline has grown in importance as a way to discourage banks from taking on unnecessary risk one of the main drivers of market discipline is information disclosure while the literature on market discipline is expansive there are no known studies on the impact of individual information disclosure requirements on market discipline our study investigates which specific disclosure requirements influence financial investors to discipline banks and which do not we find that information disclosure requirements primarily reduce or have no impact on market discipline practices

capital regulation and bank risk taking a note abstract this paper examines theoretically the effects of more stringent capital regulation on bank asset portfolio risk the analysis shows that for a value maximizing bank incentives to increase asset risk decline as its capital increases thus as long as regulatory efforts to contain asset risk and size are not reduced more stringent capital regulation unambiguously reduces the expected liability of the deposit insurance system

market discipline and deposit insurance cross country evidence presented in this paper suggests that explicit deposit insurance reduces required deposit interest rates while at the same time it lowers market discipline on bank risk taking internationally deposit insurance schemes vary widely in their coverage funding and management this reflects that there are widely differing views on how deposit insurance should optimally be structured to inform this debate we use a newly constructed data set of deposit insurance design features to examine how different design features affect deposit interest rates and market discipline

the inheritance of inequality how level is the intergenerational playing field what are the causal mechanisms that underlie the intergenerational transmission of economic status are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair these are the questions we will try to answer

the costs of price regulation lessons from railroad deregulation previous calculations of the costs of railroad rate regulation assumed that deregulation would lower railroad rate levels and allow railroads to capture significant amounts of traffic from other modes of transportation this article presents empirical results that show that neither of these effects materialized under deregulation a calculation based on actual price and market share changes places the annual cost of regulation at roughly 90 million well below previous estimates

intergenerational top income mobility in sweden capitalist dynasties in the land of equal opportunity this paper presents new evidence on intergenerational mobility at the top of the income and earnings distributions using a large dataset of matched father son pairs in sweden we find that intergenerational transmission is very strong at the top more so for income than for earnings at the extreme top top 0 1 income transmission is remarkable with an intergenerational elasticity of approximately 0 9 we also study potential transmission mechanisms and find that iq non cognitive skills and education of the sons are all unlikely channels in explaining the strong transmission within the top percentile increases in the income of the fathers if they are related at all are negatively associated with these variables wealth on the other hand has a significantly positive association our results suggest that sweden known for having relatively high intergenerational mobility in general is a society in which transmission remains strong at the very top of the distribution and wealth is the most likely channel

oligopolistic interdependence and the structure of production in banking an empirical evaluation the main purpose of this paper is to incorporate the oligopolistic nature of the banking industry into the conventional production model in order to contribute to the empirical literature on the structure conduct and performance in banking and to achieve unbiased measures of scale economies and efficiency depending on which of the models is accepted by the data this is done by appending behavioral equations specifying banks conjectures regarding the reactions of other banks to its output change this formulation enables us to test for the correct type of behavioral model and relate it to the resulting estimated technology if estimates of economies of scale and inefficiencies depend on the behavioral model adopted other studies which ignore product market behavior may well be subject to misspecification errors the paper also sheds light on the nature of the oligopolistic interdependence in the banking sector copyright 1994 by ohio state university press