Evolutionary model of the bank size distribution
AbstractAn evolutionary model of the bank size distribution is presented based on the exchange and expansion of deposit money. In agreement with empirical results the derived size distribution is lognormal with a power law tail. The key idea of the theory is to regard the creation of money as a slow process compared to exchange processes of deposit money. The exchange of deposits causes a preferential growth of banks with a fitness determined by the competitive advantage to attract permanent deposits. They generate the lognormal part of the size distribution. Sufficiently large banks, however, benefit from economies of scale leading to a Pareto tail. The model suggests that the liberalization of the banking system in the last decades is the origin of an increasing skewness of the bank size distribution. --
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2013-55.
Date of creation: 2013
Date of revision:
evolutionary economics; bank size; money; competition; Gibrat's law;
Other versions of this item:
- Kaldasch, Joachim, 2014. "Evolutionary model of the bank size distribution," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 8(10), pages 1-16.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Institutional; Evolutionary
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-14 (All new papers)
- NEP-BAN-2013-11-14 (Banking)
- NEP-EVO-2013-11-14 (Evolutionary Economics)
- NEP-HME-2013-11-14 (Heterodox Microeconomics)
- NEP-IND-2013-11-14 (Industrial Organization)
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