Do public banks compete with private banks? Evidence from concentrated loan markets in Brazil?

We measure the competitive effect of public banks in concentrated local

markets in Brazil using branch location patterns. We employ variation in

market size, number, and identity of competitors to determine how the

conduct of private banks is affected by the entry of a public bank. We find

that the market size needed to sustain a private bank branch is 35% larger if a

private competitor is present and is not significantly affected by the presence

of a public bank. These results suggest that the presence of a public bank

does not affect conduct of private banks

Journal of Money, Credit and Banking V 45, N 8, P 1581–1615, 2013

Christiano Arrigoni Coelho, João Manoel Pinho de Mello, Leonardo Bandeira Rezende.