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A Theory of Banks, Bonds, and the Distribution of Firm Size

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  • Diego Valderrama
  • Katheryn N. Russ

Abstract

We draw on stylized facts from the finance literature to build a model where altering the relative costs of bank and bond financing changes the entire distribution of firm size, with implications for the aggregate capital stock, output, and welfare. When reducing transactions costs in one market, the resulting increase in output and welfare are largest when transactions costs in the other market are very high.

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Bibliographic Info

Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 915.

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Length: 45
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Handle: RePEc:cda:wpaper:09-15

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Cited by:
  1. Katheryn Russ & Diego Valderrama, 2010. "Financial Choice in a Non-Ricardian Model of Trade," Working Papers 109, University of California, Davis, Department of Economics.
  2. Jose V. Rodriguez Mora & Christian Bauer, 2012. "Equilibrium Intermediation and Resource Allocation With a Frictional Credit Market," 2012 Meeting Papers 843, Society for Economic Dynamics.

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