Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153136
Authors: 
Champonnois, Sylvain
Year of Publication: 
2006
Series/Report no.: 
ECB Working Paper 702
Abstract: 
This paper builds a model of investment and financing that incorporates heterogeneous firms into general equilibrium. In order to characterize the financial structure of an economy, the model connects the share of market finance in total external finance and the distribution of firm sizes into a simple structural equation, with parameters related to the cost of market finance (compared to intermediated finance). We estimate the relative cost of market finance across countries with data on external financing and firm sizes from France, Germany, Italy, Spain and the United Kingdom. Using the structural model, we propose an explanation of the empirical correlation across countries between estimated financing costs and the characteristics of the population of firms based on welfare maximization.
Subjects: 
distribution of firm sizes
financing patterns
Heterogeneous firms
structural estimation
welfare analysis
JEL: 
E20
E44
C13
Document Type: 
Working Paper

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