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.