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Does Social Cooperation Affect Macroeconomic Performance? Research Project

Decentralised Reciprocity

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Principal Investigator: Colin Mayer

Colin Mayer is Peter Moores Professor of Management Studies at Said Business School, University of Oxford. He is an expert on corporate finance, governance and taxation, as well as the regulation of financial institution and the role of the corporation in contemporary society.  Colin’s current work explores the regulation of financial markets and institutions, international comparisons of financial systems and corporate governance, and their effects on the financing and control of corporations.

Co-Investigators: Philip McCann (Chair in Urban and Regional Economics, Sheffield University Management School)

Project Summary

The objective of this research programme was to understand the role that local and decentralized financial systems should play in promoting enterprise and economic development in developed economies. The has taken greater significance in relation to the coronavirus pandemic and the need to build back failing small and medium sized enterprises (SMEs), in particular in the UK with its “levelling up” agenda of reducing regional disparities.

The research involved an extensive analysis of existing literatures on decentralization of banking systems and the differences that exist across countries in Europe and North America. In addition, it looked at the way in which different financial institutions performed in promoting SME growth.

The main insight of the research is on the importance of a decentralized local banking system in promoting the growth and development of a thriving SME system, in particular in the context of the resolution of regional inequality. The research identifies precisely what is meant by a decentralized banking system, its core features and characteristics, and what is required to promote decentralized banking.


A key part of a financial system is to transform knowledge at a local firm level into information that can be used by national and global investors. That is what successful decentralized banking systems in Germany, the US and Nordic countries have succeeded in doing and where the UK has been deficient following the collapse of its local banking system in the 19th century.


The research has in addition revealed the importance of combining private and public finance through public-private partnerships, both at the local and national level, to promote regional equality. This is an area where further research is needed to understand the best institutional arrangements that are conducive to effective public-private partnerships in the financial system.



Working Paper:

Learning The Structure and Relations of Banking Systems:  International Evidence on the Role of Relationship Banking, and the UK Experience in the Light of 'Levelling-UP' Challenges

Colin Mayer, Philip McCann and Jacob Schumacher | January 18, 2021

Final WP
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