Leone Leonida | King's College London (original) (raw)

Papers by Leone Leonida

Research paper thumbnail of Escaping the trap of 'blocking': a kinetic model linking economic development and political competition

arXiv (Cornell University), Dec 17, 2015

In this paper we present a kinetic model with stochastic game-type interactions, analyzing the re... more In this paper we present a kinetic model with stochastic game-type interactions, analyzing the relationship between the level of political competition in a society and the degree of economic liberalization. The above issue regards the complex interactions between economy and institutional policies intended to introduce technological innovations in a society, where technological innovations are intended in a broad sense comprehending reforms critical to production [1]. A special focus is placed on the political replacement effect described in a macroscopic model by Acemoglu and Robinson (AR-model [3], henceforth), which can determine the phenomenon of innovation 'blocking', possibly leading to economic backwardness. One of the goals of our modelization is to obtain a mesoscopic dynamical model whose macroscopic outputs are qualitatively comparable with stylized facts of the AR-model. A set of numerical solutions is presented showing the non monotonous relationship between economic liberization and political competition, which can be considered as an emergent phenomenon of the complex socioeconomic interaction dynamic.

Research paper thumbnail of Have Medical and Political Countermeasures Mitigated Investor Fears during the COVID-19 Pandemic?

Yes. We contrast the impacts of COVID-19 shocks and medical and political countermeasures in an o... more Yes. We contrast the impacts of COVID-19 shocks and medical and political countermeasures in an otherwise standard model of financial market return determinants. During the pandemic, fears about COVID-19 can replace the economic sentiment to have a lasting negative impact on the stock market, especially in the first wave of the virus spreading. Medical research and government policies contribute to the stimulations of financial markets; however, efficient vaccines, when not developed, tend to negatively impact future stock returns and exacerbate the negative influence of COVID-19 sentiment on the stock market. Instead, such situations can be eased once medical research becomes advanced, helping the reconstruction of investor confidence. Public attention to the political support promoting economic and financial recovery has a positive impact on stock market returns and mitigates the shock of COVID-19 sentiment on the stock market.

Research paper thumbnail of The Impact of Political Calculus on the Reform of Institutions and Growth

Research paper thumbnail of A Semi-parametric Analysis On Carbon Monoxide Distribution

WIT Transactions on Ecology and the Environment, Jun 25, 2002

The purpose of the present work is to study the distribution of carbon monoxide emissions among E... more The purpose of the present work is to study the distribution of carbon monoxide emissions among European countries at NUTS level 2. By applying a nonparametric technique and accurately weighting the sample observed, it is possible to study the effects of sectoral composition of GDP, the localisation factors for the Objective 1 Regions of the European Structural Fund Framework and growth rates on the entire distribution of the environmental pollutant. Results suggests the presence of a bimodal distribution for carbon monoxide emissions that would confirm 1) the highest concentration of the pollutant in highly populated urban centres and 2) the influence of the industrial and agricultural sector on the entire distribution,

Research paper thumbnail of Interbank Networks and Liquidity Risk

Research paper thumbnail of More insecure and less paid

Research paper thumbnail of More insecure and less paid. The effect of perceived job insecurity on wage distribution (Population Days 2019)

This article employs a Counterfactual Decomposition Analysis (CDA) using both a semi-parametric a... more This article employs a Counterfactual Decomposition Analysis (CDA) using both a semi-parametric and a non-parametric method to examine the pay gap due to perceived job insecurity over the entire wage distribution of dependent workforce in Italy. Using the 2015 INAPP Survey on Quality of Work, our results exhibit a mirror J-shaped pattern in the pay gap between secure and insecure workers, with a significant sticky floor effect, i.e. a greater effect of job insecurity at the lowest quantiles. This pattern is mainly due to the characteristics effect, while the relative incidence of the coefficient component accounts roughly for 22% up to 36% of the total difference, being more relevant at the bottom of the wage distribution.

Research paper thumbnail of More insecure and less paid? The effect of perceived job insecurity on wage distribution (Sisec 2019)

Research paper thumbnail of The Sustainable City IV: Urban Regeneration and Sustainability

WIT Transactions on Ecology and the Environment, Vol 93, 2006

The huge quantity of end-of-life tires discarded annually in developed countries is posing major ... more The huge quantity of end-of-life tires discarded annually in developed countries is posing major environmental problems due to restrictions against disposal in landfills and to difficulties in obtaining suitable products to be sold in the market as secondary raw materials. Actually, mechanical processing of the tires in shredding, granulation and pulverization plants is not a fully satisfactory solution because of operational drawbacks (high energy consumption, considerable wear, low technical efficiency), in addition to the poor quality of the components. A new technology has been developed at the University of Cagliari based on the use of high velocity jets of water enabling to achieve a thorough disintegration of the rubber, leaving a very clean steel product. The rubber granules so obtained can be used either for municipal water filtration or for the manufacture of paving and building elements or as a component of surface layer in roadways, thus contributing to the improvement of living conditions in urban areas. This paper describes the main features of waterjet technology and discusses the prospects of commercial application of tire dismantling products that appear promising from both the technical and economic point of view

Research paper thumbnail of Escaping the trap of 'blocking': A kinetic model linking economic development and political competition

Kinetic & Related Models, 2016

In this paper we present a kinetic model with stochastic game-type interactions, analyzing the re... more In this paper we present a kinetic model with stochastic game-type interactions, analyzing the relationship between the level of political competition in a society and the degree of economic liberalization. The above issue regards the complex interactions between economy and institutional policies intended to introduce technological innovations in a society, where technological innovations are intended in a broad sense comprehending reforms critical to production [1]. A special focus is placed on the political replacement effect described in a macroscopic model by Acemoglu and Robinson (AR-model [3], henceforth), which can determine the phenomenon of innovation 'blocking', possibly leading to economic backwardness. One of the goals of our modelization is to obtain a mesoscopic dynamical model whose macroscopic outputs are qualitatively comparable with stylized facts of the AR-model. A set of numerical solutions is presented showing the non monotonous relationship between economic liberization and political competition, which can be considered as an emergent phenomenon of the complex socioeconomic interaction dynamic.

Research paper thumbnail of Modeling human behavior in economics and social science

Physics of Life Reviews, 2017

If citing, it is advised that you check and use the publisher's definitive version for pagination... more If citing, it is advised that you check and use the publisher's definitive version for pagination, volume/issue, and date of publication details. And where the final published version is provided on the Research Portal, if citing you are again advised to check the publisher's website for any subsequent corrections.

Research paper thumbnail of Britain and BrExit: Is the UK more attractive to supervisors? An analysis of the wage premium to supervision across the EU

British Journal of Industrial Relations, Apr 27, 2022

We studied which European Union (EU) economy was more attractive prior to Brexit for employees in... more We studied which European Union (EU) economy was more attractive prior to Brexit for employees in supervisory positions. We estimate the extra wage that supervisors earn relative to their subordinates—the wage premium to supervision (WPS)—at different quantiles of distribution of wages for 26 European economies. We find that the UK rewards supervisors more than other EU economies. Moreover, the WPS increases with wage and so increases wage inequality. Over 10% of the WPS depends on the national economic context. We discuss the implications for immigration and policymakers in relation to the post‐Brexit process.

Research paper thumbnail of Convergence

Research paper thumbnail of What Have We Not Learned from the Convergence Debate?

Mathematics

We argue that the alternative hypotheses about cross-country convergence dynamics, namely the Con... more We argue that the alternative hypotheses about cross-country convergence dynamics, namely the Conditional Convergence Hypothesis, Absolute Convergence Hypothesis, and Club Convergence hypothesis, build upon different modelling choices and answer different empirical questions. Hence, results favoring one hypothesis are not necessarily evidence against the other hypotheses. We apply several modelling approaches to a sample of world economies to support our argument, and present empirical evidence that yields controversial conclusions if the hypotheses about convergence are taken as competing. However, the controversy disappears as we note that there are neither theoretical nor empirical reasons to take evidence in favor of the Absolute Convergence Hypothesis as necessarily being against the Club Convergence Hypothesis, and vice versa. We present results for the world economies where the two processes co-exist. We conclude by arguing that when analysis is conducted at the regional leve...

Research paper thumbnail of Opportunism and MPs’ chances of re-election: an analysis of political transformism in the Italian parliament

Public Choice

We identify as political transformists the Italian members of parliament (MPs) who cross the aisl... more We identify as political transformists the Italian members of parliament (MPs) who cross the aisle and vote for legislation opposed by their own political group—i.e., MPs who transform from the political opposition to the ruling parties (or from government supporters) into a force supporting the government (or opposition)—thus representing sources of party and governmental instability. Transformism, which characterized 471 MPs over the period considered, does not coincide with the broader phenomena of party switching already studied in political science. Once we disentangle the distinct behaviors, we study whether transformism helps extend the tenures of all 7128 MPs observed from 1946 to 2013. To the best of our knowledge, ours is the first work to consider the role of transformism in the survival of politicians. Our results suggest that transforming MPs suffer marked reductions in their survival probabilities, especially when compared with their fellow parliamentarians. However, t...

Research paper thumbnail of A critical analysis towards research perspectives

Physics of Life Reviews, 2017

If citing, it is advised that you check and use the publisher's definitive version for pagination... more If citing, it is advised that you check and use the publisher's definitive version for pagination, volume/issue, and date of publication details. And where the final published version is provided on the Research Portal, if citing you are again advised to check the publisher's website for any subsequent corrections.

Research paper thumbnail of Adaptive voting: an empirical analysis of participation and choice

Dynamic models of learning and adaptation have provided realistic predictions in terms of voting ... more Dynamic models of learning and adaptation have provided realistic predictions in terms of voting behavior. This study aims at contributing to their empirical verification by investigating voting behavior in terms of participation as well as choice. We test through panel data methods an outcome-based learning mechanism based on the following assumptions: (a) people expect that the party they do not support will be unable to bring economic improvements; (b) they receive a feedback whose impact depends on the consistency between their last voting behavior and personal economic improvements (or worsening) from the last election; (c) they tend to discard choices associated to an inconsistent feedback. Results show that feedbacks of this sort affect persistence of voting behavior, interpreted as participation and voting choice. Age and trade union affiliation reinforce this adaptive behavior. The analysis also investigates the intensity of the learning feedback, differentiating between a ...

Research paper thumbnail of Suboptimal financial policies and executive ownership in the UK: evidence from a pre-crisis

Corporate Governance: The international journal of business in society, 2016

Purpose The purpose of this paper is to identify firms in the UK adopting a policy of high cash a... more Purpose The purpose of this paper is to identify firms in the UK adopting a policy of high cash and low leverage and investigate how executive ownership contributes to this decision. Design/methodology/approach Firms following this policy are identified both by using a fixed classification approach and the analysis of the distribution of cash and leverage. Logit analysis is then used to estimate the probability of adopting the policy as a function of executive ownership. Findings Extreme financial policies are suboptimal as firms adopting these policies tend to undershoot (overshoot) their target leverage (cash holdings) ratios. The impact of the executive ownership on the probability of adopting this policy is U-shaped, in line with the alignment–entrenchment hypothesis. Practical implications Despite the substantial presence of non-executive directors in the boards and a significant amount of shareholdings by executive directors, the firms under analysis have adopted suboptimal fi...

Research paper thumbnail of Political transformism: An analysis of the Italian parliament (1946-2013)

We study the role of political transformism, defined as the ability to be co-opted from political... more We study the role of political transformism, defined as the ability to be co-opted from political opposition (or government support) and transformed into a government force (or opposition), on the political survival of 7,127 members of the Italian Chamber of Deputies and Senate, observed from 1946 to 2013. Our results suggest that being a political transformist is a type of political strategy, which often increases the probability of survival. The system of voting in parliament whether open or with secret ballot -, and the electoral system affects the relevance of the phenomenon which turns out to be more relevant in the Second republic. a Department of Economics and Law, University of Rome “Sapienza”, Via del Castro Laurenziano 9, 00161, Rome, Italy b Department of Economics and Law, University of Rome “Sapienza”, Via del Castro Laurenziano 9, 00161, Rome, Italy c School of Economics and Finance, Queen Mary University of London, Mile End Road, E2 4NS, London, U.K.

Research paper thumbnail of Failure of capital requirements regulation in the banking industry: evidence from a bank-based financial system

Journal of Public Finance and Public Choice, 2020

This article studies the impact of Basel I and Basel II regulation in a bank-based financial syst... more This article studies the impact of Basel I and Basel II regulation in a bank-based financial system on the degree of competition in the banking sector, as measured via the Panzar and Rosse statistic. Strikingly, our results suggest that, contrary to the regulator’s expectation, stability-oriented regulation reduces competition in the banking sector. Further analysis suggests that while Basel does not have a significant impact on the large banks, it reduces competition among other banks, which move towards uncompetitive dynamics. This shift towards monopoly is aligned with the hypothesis of this regulation to create competitive advantages for large banks at the expense of the others.

Research paper thumbnail of Escaping the trap of 'blocking': a kinetic model linking economic development and political competition

arXiv (Cornell University), Dec 17, 2015

In this paper we present a kinetic model with stochastic game-type interactions, analyzing the re... more In this paper we present a kinetic model with stochastic game-type interactions, analyzing the relationship between the level of political competition in a society and the degree of economic liberalization. The above issue regards the complex interactions between economy and institutional policies intended to introduce technological innovations in a society, where technological innovations are intended in a broad sense comprehending reforms critical to production [1]. A special focus is placed on the political replacement effect described in a macroscopic model by Acemoglu and Robinson (AR-model [3], henceforth), which can determine the phenomenon of innovation 'blocking', possibly leading to economic backwardness. One of the goals of our modelization is to obtain a mesoscopic dynamical model whose macroscopic outputs are qualitatively comparable with stylized facts of the AR-model. A set of numerical solutions is presented showing the non monotonous relationship between economic liberization and political competition, which can be considered as an emergent phenomenon of the complex socioeconomic interaction dynamic.

Research paper thumbnail of Have Medical and Political Countermeasures Mitigated Investor Fears during the COVID-19 Pandemic?

Yes. We contrast the impacts of COVID-19 shocks and medical and political countermeasures in an o... more Yes. We contrast the impacts of COVID-19 shocks and medical and political countermeasures in an otherwise standard model of financial market return determinants. During the pandemic, fears about COVID-19 can replace the economic sentiment to have a lasting negative impact on the stock market, especially in the first wave of the virus spreading. Medical research and government policies contribute to the stimulations of financial markets; however, efficient vaccines, when not developed, tend to negatively impact future stock returns and exacerbate the negative influence of COVID-19 sentiment on the stock market. Instead, such situations can be eased once medical research becomes advanced, helping the reconstruction of investor confidence. Public attention to the political support promoting economic and financial recovery has a positive impact on stock market returns and mitigates the shock of COVID-19 sentiment on the stock market.

Research paper thumbnail of The Impact of Political Calculus on the Reform of Institutions and Growth

Research paper thumbnail of A Semi-parametric Analysis On Carbon Monoxide Distribution

WIT Transactions on Ecology and the Environment, Jun 25, 2002

The purpose of the present work is to study the distribution of carbon monoxide emissions among E... more The purpose of the present work is to study the distribution of carbon monoxide emissions among European countries at NUTS level 2. By applying a nonparametric technique and accurately weighting the sample observed, it is possible to study the effects of sectoral composition of GDP, the localisation factors for the Objective 1 Regions of the European Structural Fund Framework and growth rates on the entire distribution of the environmental pollutant. Results suggests the presence of a bimodal distribution for carbon monoxide emissions that would confirm 1) the highest concentration of the pollutant in highly populated urban centres and 2) the influence of the industrial and agricultural sector on the entire distribution,

Research paper thumbnail of Interbank Networks and Liquidity Risk

Research paper thumbnail of More insecure and less paid

Research paper thumbnail of More insecure and less paid. The effect of perceived job insecurity on wage distribution (Population Days 2019)

This article employs a Counterfactual Decomposition Analysis (CDA) using both a semi-parametric a... more This article employs a Counterfactual Decomposition Analysis (CDA) using both a semi-parametric and a non-parametric method to examine the pay gap due to perceived job insecurity over the entire wage distribution of dependent workforce in Italy. Using the 2015 INAPP Survey on Quality of Work, our results exhibit a mirror J-shaped pattern in the pay gap between secure and insecure workers, with a significant sticky floor effect, i.e. a greater effect of job insecurity at the lowest quantiles. This pattern is mainly due to the characteristics effect, while the relative incidence of the coefficient component accounts roughly for 22% up to 36% of the total difference, being more relevant at the bottom of the wage distribution.

Research paper thumbnail of More insecure and less paid? The effect of perceived job insecurity on wage distribution (Sisec 2019)

Research paper thumbnail of The Sustainable City IV: Urban Regeneration and Sustainability

WIT Transactions on Ecology and the Environment, Vol 93, 2006

The huge quantity of end-of-life tires discarded annually in developed countries is posing major ... more The huge quantity of end-of-life tires discarded annually in developed countries is posing major environmental problems due to restrictions against disposal in landfills and to difficulties in obtaining suitable products to be sold in the market as secondary raw materials. Actually, mechanical processing of the tires in shredding, granulation and pulverization plants is not a fully satisfactory solution because of operational drawbacks (high energy consumption, considerable wear, low technical efficiency), in addition to the poor quality of the components. A new technology has been developed at the University of Cagliari based on the use of high velocity jets of water enabling to achieve a thorough disintegration of the rubber, leaving a very clean steel product. The rubber granules so obtained can be used either for municipal water filtration or for the manufacture of paving and building elements or as a component of surface layer in roadways, thus contributing to the improvement of living conditions in urban areas. This paper describes the main features of waterjet technology and discusses the prospects of commercial application of tire dismantling products that appear promising from both the technical and economic point of view

Research paper thumbnail of Escaping the trap of 'blocking': A kinetic model linking economic development and political competition

Kinetic & Related Models, 2016

In this paper we present a kinetic model with stochastic game-type interactions, analyzing the re... more In this paper we present a kinetic model with stochastic game-type interactions, analyzing the relationship between the level of political competition in a society and the degree of economic liberalization. The above issue regards the complex interactions between economy and institutional policies intended to introduce technological innovations in a society, where technological innovations are intended in a broad sense comprehending reforms critical to production [1]. A special focus is placed on the political replacement effect described in a macroscopic model by Acemoglu and Robinson (AR-model [3], henceforth), which can determine the phenomenon of innovation 'blocking', possibly leading to economic backwardness. One of the goals of our modelization is to obtain a mesoscopic dynamical model whose macroscopic outputs are qualitatively comparable with stylized facts of the AR-model. A set of numerical solutions is presented showing the non monotonous relationship between economic liberization and political competition, which can be considered as an emergent phenomenon of the complex socioeconomic interaction dynamic.

Research paper thumbnail of Modeling human behavior in economics and social science

Physics of Life Reviews, 2017

If citing, it is advised that you check and use the publisher's definitive version for pagination... more If citing, it is advised that you check and use the publisher's definitive version for pagination, volume/issue, and date of publication details. And where the final published version is provided on the Research Portal, if citing you are again advised to check the publisher's website for any subsequent corrections.

Research paper thumbnail of Britain and BrExit: Is the UK more attractive to supervisors? An analysis of the wage premium to supervision across the EU

British Journal of Industrial Relations, Apr 27, 2022

We studied which European Union (EU) economy was more attractive prior to Brexit for employees in... more We studied which European Union (EU) economy was more attractive prior to Brexit for employees in supervisory positions. We estimate the extra wage that supervisors earn relative to their subordinates—the wage premium to supervision (WPS)—at different quantiles of distribution of wages for 26 European economies. We find that the UK rewards supervisors more than other EU economies. Moreover, the WPS increases with wage and so increases wage inequality. Over 10% of the WPS depends on the national economic context. We discuss the implications for immigration and policymakers in relation to the post‐Brexit process.

Research paper thumbnail of Convergence

Research paper thumbnail of What Have We Not Learned from the Convergence Debate?

Mathematics

We argue that the alternative hypotheses about cross-country convergence dynamics, namely the Con... more We argue that the alternative hypotheses about cross-country convergence dynamics, namely the Conditional Convergence Hypothesis, Absolute Convergence Hypothesis, and Club Convergence hypothesis, build upon different modelling choices and answer different empirical questions. Hence, results favoring one hypothesis are not necessarily evidence against the other hypotheses. We apply several modelling approaches to a sample of world economies to support our argument, and present empirical evidence that yields controversial conclusions if the hypotheses about convergence are taken as competing. However, the controversy disappears as we note that there are neither theoretical nor empirical reasons to take evidence in favor of the Absolute Convergence Hypothesis as necessarily being against the Club Convergence Hypothesis, and vice versa. We present results for the world economies where the two processes co-exist. We conclude by arguing that when analysis is conducted at the regional leve...

Research paper thumbnail of Opportunism and MPs’ chances of re-election: an analysis of political transformism in the Italian parliament

Public Choice

We identify as political transformists the Italian members of parliament (MPs) who cross the aisl... more We identify as political transformists the Italian members of parliament (MPs) who cross the aisle and vote for legislation opposed by their own political group—i.e., MPs who transform from the political opposition to the ruling parties (or from government supporters) into a force supporting the government (or opposition)—thus representing sources of party and governmental instability. Transformism, which characterized 471 MPs over the period considered, does not coincide with the broader phenomena of party switching already studied in political science. Once we disentangle the distinct behaviors, we study whether transformism helps extend the tenures of all 7128 MPs observed from 1946 to 2013. To the best of our knowledge, ours is the first work to consider the role of transformism in the survival of politicians. Our results suggest that transforming MPs suffer marked reductions in their survival probabilities, especially when compared with their fellow parliamentarians. However, t...

Research paper thumbnail of A critical analysis towards research perspectives

Physics of Life Reviews, 2017

If citing, it is advised that you check and use the publisher's definitive version for pagination... more If citing, it is advised that you check and use the publisher's definitive version for pagination, volume/issue, and date of publication details. And where the final published version is provided on the Research Portal, if citing you are again advised to check the publisher's website for any subsequent corrections.

Research paper thumbnail of Adaptive voting: an empirical analysis of participation and choice

Dynamic models of learning and adaptation have provided realistic predictions in terms of voting ... more Dynamic models of learning and adaptation have provided realistic predictions in terms of voting behavior. This study aims at contributing to their empirical verification by investigating voting behavior in terms of participation as well as choice. We test through panel data methods an outcome-based learning mechanism based on the following assumptions: (a) people expect that the party they do not support will be unable to bring economic improvements; (b) they receive a feedback whose impact depends on the consistency between their last voting behavior and personal economic improvements (or worsening) from the last election; (c) they tend to discard choices associated to an inconsistent feedback. Results show that feedbacks of this sort affect persistence of voting behavior, interpreted as participation and voting choice. Age and trade union affiliation reinforce this adaptive behavior. The analysis also investigates the intensity of the learning feedback, differentiating between a ...

Research paper thumbnail of Suboptimal financial policies and executive ownership in the UK: evidence from a pre-crisis

Corporate Governance: The international journal of business in society, 2016

Purpose The purpose of this paper is to identify firms in the UK adopting a policy of high cash a... more Purpose The purpose of this paper is to identify firms in the UK adopting a policy of high cash and low leverage and investigate how executive ownership contributes to this decision. Design/methodology/approach Firms following this policy are identified both by using a fixed classification approach and the analysis of the distribution of cash and leverage. Logit analysis is then used to estimate the probability of adopting the policy as a function of executive ownership. Findings Extreme financial policies are suboptimal as firms adopting these policies tend to undershoot (overshoot) their target leverage (cash holdings) ratios. The impact of the executive ownership on the probability of adopting this policy is U-shaped, in line with the alignment–entrenchment hypothesis. Practical implications Despite the substantial presence of non-executive directors in the boards and a significant amount of shareholdings by executive directors, the firms under analysis have adopted suboptimal fi...

Research paper thumbnail of Political transformism: An analysis of the Italian parliament (1946-2013)

We study the role of political transformism, defined as the ability to be co-opted from political... more We study the role of political transformism, defined as the ability to be co-opted from political opposition (or government support) and transformed into a government force (or opposition), on the political survival of 7,127 members of the Italian Chamber of Deputies and Senate, observed from 1946 to 2013. Our results suggest that being a political transformist is a type of political strategy, which often increases the probability of survival. The system of voting in parliament whether open or with secret ballot -, and the electoral system affects the relevance of the phenomenon which turns out to be more relevant in the Second republic. a Department of Economics and Law, University of Rome “Sapienza”, Via del Castro Laurenziano 9, 00161, Rome, Italy b Department of Economics and Law, University of Rome “Sapienza”, Via del Castro Laurenziano 9, 00161, Rome, Italy c School of Economics and Finance, Queen Mary University of London, Mile End Road, E2 4NS, London, U.K.

Research paper thumbnail of Failure of capital requirements regulation in the banking industry: evidence from a bank-based financial system

Journal of Public Finance and Public Choice, 2020

This article studies the impact of Basel I and Basel II regulation in a bank-based financial syst... more This article studies the impact of Basel I and Basel II regulation in a bank-based financial system on the degree of competition in the banking sector, as measured via the Panzar and Rosse statistic. Strikingly, our results suggest that, contrary to the regulator’s expectation, stability-oriented regulation reduces competition in the banking sector. Further analysis suggests that while Basel does not have a significant impact on the large banks, it reduces competition among other banks, which move towards uncompetitive dynamics. This shift towards monopoly is aligned with the hypothesis of this regulation to create competitive advantages for large banks at the expense of the others.