Evolutionary Model of the Bank Size Distribution

Abstract

An evolutionary model of the bank size distribution is presented based on the exchange and creation of deposit money. In agreement with empirical results the derived size distribution is lognormal with a power law tail. The theory is based on the idea that the size distribution is the result of the competition between banks for permanent deposit money. The exchange of deposits causes a preferential growth of banks with a fitness that is determined by the competitive advantage to attract permanent deposits. While growth rate fluctuations are responsible for the lognormal part of the size distribution, treating the mean growth rate of banks as small, large banks benefit from economies of scale generating the Pareto tail. JEL G21 L11 E11

Evolutionary Model of the City Size Distribution

“…Both the reproduction of humans and their migration are self-amplifying processes, while the migration flow is shown to be the result of an evolutionary competition between cities. Growth rate fluctuations of these processes are the origin of Gibrat's law in similarity to other competing social systems [28][29][30]. Gibrat's law together with a small mean growth rate generates the power law tail for large cities.…”