Non-Uniform Wealth Distribution in a Simple Spatial Banking Model

Journal of Applied Economics, Vol. 11, No. 1, pp. 145-165, May 2008

Posted: 23 Jul 2008

See all articles by Gabriel V. Montes Rojas

Gabriel V. Montes Rojas

University of Illinois at Urbana-Champaign

Date Written: May 2008

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

JEL Classification: G21, L11

Suggested Citation

Montes Rojas, Gabriel V., Non-Uniform Wealth Distribution in a Simple Spatial Banking Model (May 2008). Journal of Applied Economics, Vol. 11, No. 1, pp. 145-165, May 2008, Available at SSRN: https://ssrn.com/abstract=1169875

Gabriel V. Montes Rojas (Contact Author)

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

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