Non-uniform wealth distribution in a simple spatial banking model

Journal of Applied Economics, 2008, vol. XI, pages 145-165

Abstract: This paper uses a static spatial banking model with a non-uniform wealth distribution to provide theoretical assessments for differences in banks’ prices and locations across regions. It assumes imperfect information, where banks know more about individuals if they are “near” the bank and individuals incur in a cost proportional to this distance to show the viability of their projects to the bank. A free entry model is constructed to account for banks’ tendency to concentrate in rich regions and to charge lower prices. Comparative statics exercises show the effect of changes in the monitoring technology and wealth dispersion.

Keywords: spatial banking; location (search for similar items in EconPapers)
JEL-codes: G21 L11 (search for similar items in EconPapers)

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