Innovation, Deregulation, and the Life Cycle of a Financial Service Industry
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Summary:
This paper examines innovation, deregulation, and firm dynamics over the life cycle of the U.S. ATM and debit card industry. In doing so, we construct a dynamic equilibrium model to study how a major product innovation (introducing the new debit card function) interacted with banking deregulation drove the industry shakeout. Calibrating the model to a novel dataset on ATM network entry, exit, size, and product offerings shows that our theory fits the quantitative pattern of the industry well. The model also allows us to conduct counterfactual analyses to evaluate the respective roles that innovation and deregulation played in the industry evolution.
Series:
Working Paper No. 2015/192
Subject:
Banking Economic sectors Expenditure Financial services Public expenditure review Services sector Technological innovation Technology
English
Publication Date:
August 18, 2015
ISBN/ISSN:
9781513537733/1018-5941
Stock No:
WPIEA2015192
Pages:
42
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