برآورد تقاضا و رفاه مصرف کننده در صنعت بانکداری
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|18284||2008||16 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Banking & Finance, Volume 32, Issue 8, August 2008, Pages 1661–1676
This paper estimates a structural demand model for commercial bank deposit services in order to measure the effects on consumers given dramatic changes in bank services throughout US branching deregulation in the 1990s. Following the discrete choice literature, consumer decisions are based on prices and bank characteristics. Consumers are found to respond to deposit rates, and to a lesser extent, to account fees, in choosing a depository institution. Moreover, consumers respond favorably to the branch staffing and geographic density, as well as to the bank’s age, size, and geographic diversification. Consumers in most markets experience a slight increase in welfare throughout the period.
Following the removal of regulatory barriers to the geographic expansion of the banking firm, the US banking industry experienced considerable growth and consolidation in the 1990s, with significant entry and exit. In particular, the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act allowed for nationwide branching by letting banks open branches in almost any US state, and as such dramatically changed the strategic possibilities of the firms in the industry. The purpose of this paper is to measure the impact on consumer welfare following significant changes in banking services in the period. In order to measure consumer welfare, I develop a structural model of demand for commercial bank deposit services that allows not only for the changes observed in prices, but also those in service characteristics, such as the size of the branch network and the geographic diversification. While what interests us here is the effect of these changes on consumers, regardless of their cause, it is nevertheless interesting to review the background related to the removal of geographic restrictions in banking. While no causal relationship can be established, the Riegle-Neal Act of 1994 is likely to have played an important role in the expansion of branch networks and other changes in bank prices and services throughout the 1990s. For many years, firms and government agents debated about the best regulatory framework regarding the geographic expanse of a bank’s activities. Those in favor of deregulation usually argued that it would bring greater efficiency and competition among banks, with resulting benefits to consumers. Those against deregulation commonly alleged that the removal of geographic restrictions would lead to highly concentrated banking markets and high profits in detriment of consumer welfare. In terms of the theory, support can be found for both views based on the different assumptions one is willing to make about bank competition, such as the degree of product differentiation and the nature of the production technology. In previous empirical research, the lifting of geographic restrictions in banking has been linked to an improvement of economic conditions (Jayaratne and Strahan, 1996); bank performance and efficiency (Jayaratne and Strahan, 1998 and Stiroh and Strahan, 2002); increase in service quality, costs and fees accompanied with no effect on market structure (Dick, 2006); significant bank entry (Amel and Liang, 1992); and an increase in bank stability (Calomiris, 2000). In terms of the political process of the phasing out of the heavy geographic regulation on banking activities, Kroszner and Strahan (1999) find that small banks were the most resistant to branching deregulation and therefore the most likely to suffer from it. The industrial organization literature has gone a long way in recent times in the estimation of structural models of demand that take into account product differentiation, and, given their microfoundations, are particularly useful to address the effects from changes in policy or the market environment. This paper estimates a discrete choice model of demand for banking services by making use of some of these techniques. While this paper was the first to implement this machinery to banking, much work has been reported recently applying it to answer other important policy questions in the industry. Adams et al. (2007) estimate deposit demand for banks as well as thrifts in order to determine whether they are close substitutes, an important question for antitrust regulation given its implications for the definition of the relevant geographic market. In her exploration of ATM networks, Ishii (2005) estimates a structural model of deposit demand and bank behavior in order to determine the effects of surcharges – fees charged to unaffiliated customers – on demand, ATM investment and competition. Along a similar vein, Knittel and Stango (2004) estimate a deposit demand to determine the effects of ATM-fee induced incompatibility on ATM deployment. Given a variety of banks in a market – defined as a Metropolitan Statistical Area – a consumer is assumed to choose one bank for deposit services. This decision depends on the prices offered by the bank, checking account fees and deposit interest rates paid, and non-price characteristics such as the size of the branch network, branch personnel, and geographic diversification. As a result, the model can capture the net effect on consumers from the changes in all of these features throughout the period. Following the discrete choice literature, consumer preferences for bank services are identified from aggregate market shares across markets in the US by assuming a distribution for the unobserved consumer taste. The discrete choice approach, by defining consumer preferences over characteristics as opposed to actual products or firms, incorporates product differentiation explicitly while avoiding the estimation of a large number of substitution parameters across firms. The model is estimated for the US commercial banking sector over 1993–1999, using a data set that combines information from several industry sources. The Riegle-Neal branching deregulation occurred between 1994 and 1997. This sample is chosen as 1993 predates the deregulation and 1999 follows it, thereby allowing for changes in banking services to take place, while keeping the link with deregulation strong. Based on the estimation of logit-based models, the results indicate that consumers respond to deposit rates, and to a lesser extent, to account fees, in choosing a depository institution. Moreover, consumer demand responds favorably to the staffing and geographic density of local branches, as well as to the age, size, and geographic diversification of banks. The paper also finds important differences across markets in the demand for banking services, with higher income areas being more responsive to prices and bank size, and less to location characteristics, relative to lower income areas. This could be related to a number of factors, such as competition being less fierce and branch networks smaller in lower income areas. In light of the changes in bank services throughout the period, I find that the net effect on consumer welfare is positive in most markets. The consumer in the median market experienced a gain in welfare of $0.005–0.01 per dollar (depending on the model), representing an annual gain of $8–18 for a consumer with an average deposit balance. Even in markets where prices increased, the improvement in service characteristics usually made up for the detrimental effect of the price increase. As consumers are found to value several bank attributes other than price, this exercise is at least suggestive of the bias that might arise in welfare inferences based solely on prices and concentration measures. In particular, the usual policy approach of focusing on the price effects in the case of mergers might need to acquire a broader perspective. The paper is organized as follows. Section 2 provides an overview of the banking industry and the deregulation. In Section 3, the empirical framework is outlined. In Section 4, I describe the data and estimation. Results are presented in Section 5, while Section 6 concludes.
نتیجه گیری انگلیسی
The purpose of this paper has been to estimate the demand for deposit services in the US commercial banking industry in order to asses the effect on consumers from the significant changes in banking services throughout the 1990s. The model is able to accommodate the various changes that have taken place in banking markets, both in terms of service prices and characteristics, and in particular those that occurred following deregulation, such as the increase in the geographic expanse of a bank’s service. The results provide insight on consumer behavior in choosing a deposit institution, as consumers are found to respond not only to prices but also to several bank attributes as well. Despite all the changes in the industry and the fears that some had about the potential harmful effects on competition, the results suggest that consumers, if anything, benefited from nationwide branching. Clearly, the paper is not able to establish a definite causal relationship from deregulation to consumer welfare. While the increase in the branch network was only possible under deregulation, the actual form this expansion took could have responded to several other factors changing throughout the period as well. Understanding the form of demand and consumer behavior in banking has several immediate uses. The use of a structural model of demand, which incorporates product differentiation, provides a framework for the analysis of policy. The estimates of consumer preferences across bank characteristics can be used to analyze the effects of potential mergers or various other changes in the environment on consumer welfare. This kind of counterfactual exercises can be complemented with the modeling of the supply side. In the banking industry, this would be particularly interesting in light of the extensive applied research that has been carried out in banking cost function estimation. While there is usually very little prior knowledge on the technical characteristics of the production side, the banking industry enjoys a wealth of results and methods from the empirical literature on cost functions.46