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Firm Size, Bank Size, and Financial Development

Daryna Grechyna ()

MPRA Paper from University Library of Munich, Germany

Abstract: Financial intermediation facilitates economic development by providing entrepreneurs with external finance. The relative costs of financing depend on the relative efficiency of the financial sector and the sector using financial intermediation services, the real sector. These costs determine the occupational choices and the set of active firms in the financial and real sectors. A model of firm-size distributions in the financial and real sectors results. This model is calibrated to match facts about the U.S. economy, such as the interest-rate spread and the establishment-size distributions in the financial and real sectors. It is then used to evaluate the importance of the relative technological progress in the financial and real sectors for the dynamics of the average establishment size in the financial sector. The model accounts for 58\% of the reduction in the average establishment size in the U.S. financial sector over 1986-2006 and for a 4.5 persons per establishment decline in the average size of the financial sector establishment in Taiwan over 1971-2011.

Keywords: economic development; financial development; technological progress; firm-size distributions; interest-rate spreads. (search for similar items in EconPapers)
JEL-codes: E13 O11 O16 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-mac and nep-sbm
Date: 2017-12-07
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https://mpra.ub.uni-muenchen.de/83196/1/MPRA_paper_83196.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/88885/1/MPRA_paper_88885.pdf revised version (application/pdf)

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Journal Article: Firm size, bank size, and financial development (2018) Downloads
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