ABSTRACT
Tables 12.1 and 12.2 present estimates of the SCP model based on Equation 5.8 with, respectively, the C3 ratio and the Herfindahl-Hirschman Index (HHI ).
We include a number of control variables, in line with the Panzar-Rosse model estimated previously. The fit of both specifications is roughly similar, with an adjusted R2 between 23 percent (for Argentina) and 97 percent (for Sweden). For most countries, the concentration ratio and the control variables explain roughly 80 percent of the variation in the banks’ price markups. The funding rate’s coefficient (IE/FUN) has the expected negative sign and is highly significant. The wage rate (PE/TA) has a positive significant sign: banks that offer higher wages in order to attract more qualified personnel are rewarded with higher profitability.
