estimating a theoretical model of state banking competition using a dynamic panel: the brazilian case

In this paper we set up a model of regional banking competition based on Bresnahan (1982), Lau (1982) and Nakane (2002). The structural model is estimated using data from eight Brazilian states and a dynamic panel. The results show that on average the level of competition in the Brazilian banking system is high, even tough the null of perfect competition can be rejected at the usual significance levels. This result also prevails at the state level: Rio Grande do Sul, São Paulo, Rio de Janeiro, Pernambuco and Minas Gerais have high degree of competition.