Discussion Paper 19

Does banking competition affect Europe's growth?

Rients Galema, Michael Koetter, Aljar Meesters and Robert Inklaar

University of Groningen (RUG), Netherlands



This paper investigates the implications of European banking market competition on the reallocation of productive factors across rms and thereby aggregate growth. Financial intermediaries are crucial in selecting promising rms to fund, thereby contributing to technical change and economic growth. In particular, banks' expertise in generating information when lending to opaque borrowers facilitates the reallocation of production factors to rms that use them most productively (Hsieh and Klenow, 2009). In this paper we use rm-level and bank-level data to estimate this reallocation component of industry growth and try to determine whether reallocation bene ted or su ered from changes in banking market competition across EU countries.


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Does banking competition affect Europe's growth?



This is an updated version of the December 2012 paper of the same title


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Judith Harris


Birmingham Business School
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Birmingham B15 2TT




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This project is funded by the European Commission, Research Directorate General as part of the 7th Framework Programme, Theme 8: Socio-Economic Sciences and Humanities.

Grant Agreement no:244 709

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