Working Paper: CEPR ID: DP14516
Authors: Caroline Fohlin; Matthew Jaremski
Abstract: Concentration plays a key role in banking efficiency and stability, yet the literature lacks any long-run analysis of U.S. banking industry structure. This paper uses newly-collected archival data to provide the first study of banking concentration from the early years of the republic through 2019. While concentration was declining or stable before the mid-1920s, statistical tests identify a structural break thereafter, as concentration started steadily rising as a result of growth at the nation’s largest five banks, particularly those located in New York City. A second structural break in the mid-1990s further accelerated the upward trend in concentration before slowing down during the Great Recession.
Keywords: bank concentration; too big to fail
JEL Codes: G20; E44; N11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in banking concentration (F65) | role of large banks in financial crises and economic growth (F65) |
| growth of the largest five banks in New York City (F65) | increase in banking concentration (F65) |
| structural break in the mid-1920s (N13) | increase in banking concentration (F65) |
| structural break in the mid-1990s (N12) | increase in banking concentration (F65) |