On Measuring Concentration in Banking Systems

7 Pages Posted: 4 Dec 2006

See all articles by Carlos Alegria

Carlos Alegria

University of Southampton

Klaus Schaeck

University of Bristol

Multiple version iconThere are 2 versions of this paper

Date Written: September 2006

Abstract

By assuming a Pareto-type distribution of bank sizes within banking systems, we investigate the effect of changes to Zipf's slope parameter (a) and the sample size to the behaviour of different concentration indexes, such as the 3-bank concentration ratio, the Herfindahl-Hirschman index and the 5%-concentration ratio. Analytical relations between these concentration indices are derived and the elasticity of these indexes to changes in a and the sample size N is also investigated. We show different regimes under which each index can be used most appropriately. Our results are relevant to researchers and policymakers who extensively employ these summary measures of concentration.

Keywords: Zipf's law, concentration indices, banking

JEL Classification: G21, L16, C49, D31

Suggested Citation

Alegria, Carlos and Schaeck, Klaus, On Measuring Concentration in Banking Systems (September 2006). Available at SSRN: https://ssrn.com/abstract=949056 or http://dx.doi.org/10.2139/ssrn.949056

Carlos Alegria (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Klaus Schaeck

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

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