Innovation, Deregulation, and the Life Cycle of a Financial Service Industry
IMF Working Papers, August 18, 2015
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- Innovation, Deregulation, and the Life Cycle of a Financial Service Industry
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Bibliographic details
- Authors: Fumiko Hayashi, Grace B Li, Zhu Wang
- Published: August 18, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513537733.001
Overview
- Examines innovation, deregulation, and firm dynamics over the life cycle of the U.S. ATM and debit card industry.
- Focuses on how a major product innovation (introducing the new debit card function) interacted with banking deregulation to drive the industry shakeout.
- Paper authors: Fumiko Hayashi, Grace B Li, Zhu Wang.
- Date on page: August 18, 2015.
Methodology and Data
- Constructs a dynamic equilibrium model to study industry evolution and firm dynamics.
- Calibrates the model to a novel dataset on ATM network entry, exit, size, and product offerings.
- Uses the calibrated model to conduct counterfactual analyses to evaluate the respective roles of innovation and deregulation in industry evolution.
Key Findings
- The calibrated model fits the quantitative pattern of the industry well (model-to-data fit asserted by the authors).
- The interaction between the debit card innovation and banking deregulation is identified as a driver of the industry shakeout.
- The model enables quantification and comparison of the separate contributions of innovation and deregulation through counterfactual scenarios.
Subjects and Keywords
- Subject areas: Banking, Economic sectors, Expenditure, Financial services, Public expenditure review, Services sector, Technological innovation, Technology.
- Keywords: ATM network, ATM-debit card, ATM-debit network, ATM-debit service, automated teller machine, debit innovation, Deregulation, Industry Dynamics, Innovation, Public expenditure review, Services sector, Shakeout, Technological innovation, WP.