Skip to main content
    • Aa
    • Aa
  • Get access
    Check if you have access via personal or institutional login
  • Cited by 5
  • Cited by
    This article has been cited by the following publications. This list is generated based on data provided by CrossRef.

    Abuzayed, Bana and Al-Fayoumi, Nedal 2016. Bank concentration, institutional quality, and economic growth. Review of International Business and Strategy, Vol. 26, Issue. 2, p. 219.

    Severe, Sean 2016. An empirical analysis of bank concentration and monetary policy effectiveness. Journal of Financial Economic Policy, Vol. 8, Issue. 2, p. 163.

    Huang, Ho-Chuan (River) Fang, WenShwo and Miller, Stephen M. 2014. Banking market structure, liquidity needs, and industrial growth volatility. Journal of Empirical Finance, Vol. 26, p. 1.

    Žvirblis, Algis and Buračas, Antanas 2010. The consolidated measurement of the financial markets development: The case of transitional economies. Technological and Economic Development of Economy, Vol. 16, Issue. 2, p. 266.

    Roberts, Mark A. 2009. FINANCIAL MARKET COMPETITION AND ECONOMIC GROWTH: THE IMPORTANCE OF HOW PROFITS ARE RETURNED. Bulletin of Economic Research, Vol. 61, Issue. 1, p. 21.



  • DOI:
  • Published online: 01 April 2005

We present an endogenous growth model with two sectors: a real sector where the final good is produced, and a banking sector that intermediates between savers and firms. Banking concentration exerts two opposite effects on growth. On the one hand, it induces economies of specialization, which is beneficial to growth. On the other hand, it results in duplication of banks' investment in fixed capital, which is detrimental to growth. The trade-off between the two opposing effects is ambiguous and can vary along the process of economic development. Hence, there is a potential nonlinear and nonmonotonic relationship between concentration and growth. We test this implication, using cross-country data on income and industry growth. We find that banking concentration is negatively associated with per-capita income growth and industrial growth only in low-income countries. This suggests that reducing concentration is more likely to promote growth in low-income countries than in high-income ones.

Corresponding author
Address correspondence to: Bassam Fattouh, Centre for Financial and Management Studies, SOAS, Thornhaugh Street, Russell Square, London WC1H 0XG; e-mail:
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *