Global developments in banking competition

This chapter reviews existing literature on the measurement of competition in banking, as well as its applications across different regions of the world. Starting from competition measures based on market shares such as the Herfindahl–Hirschman index, the field has by now primarily moved to the use of bank-level measures grounded in New Empirical Industrial Organization (NEIO), such as the Panzar and Rosse (1987) H-statistic and the Lerner index. Using these measures, many researchers have documented a decreasing level of competition during the last few decades in all parts of the world. We confirm this trend using the World Bank’s Global Financial Development database