Bank Performance: Market Power or Efficient Structure?

Regulatory change not seen since the Great Depression swept the U.S. banking industry beginning in the early 1980s, culminating with the Interstate Banking and Branching Efficiency Act of 1994. Significant consolidations have occurred in the banking industry. This paper considers the market-power versus the efficient-structure theories of the positive correlation between banking concentration and performance on a state-by-state basis. Temporal causality tests imply that bank concentration leads bank profitability, supporting the market-power, rather than the efficient-structure, theory of that positive correlation. Our finding suggests that bank regulators, by focusing on local banking markets, missed the initial stages of an important structural change at the state level.

Land Inheritance Rules: Theory and Cross-Cultural Analysis

This paper develops a general theory of land inheritance rules. We distinguish between two classes of rules: those that allow a testator discretion in disposing of his land (like a best-qualified rule), and those that constrain his choice (like primogeniture). The primary benefit of the latter is to prevent rent seeking by heirs, but the cost is that testators cannot make use of information about the relative abilities of his heirs to manage the land. We also account for the impact of scale economies in land use. We conclude by offering some empirical tests of the model using a cross-cultural sample of societies.