Discussion Paper 19
Does banking competition affect Europe's growth?
Rients Galema, Michael Koetter, Aljar Meesters and Robert Inklaar
University of Groningen (RUG), Netherlands
Abstract
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.
Full text
Does banking competition affect Europe's growth?
This is an updated version of the December 2012 paper of the same title