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Aggregate concentration and the cost of systemic risk

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  • Sherrill Shaffer

Abstract

Aggregate concentration may exacerbate systemic risk if the social cost of business failure is a superlinear function of the fraction of industry capacity lost to failure. This result suggests new empirical tests to inform policy debates, as well as supporting an efficiency rationale for restricting aggregate concentration under certain conditions.

Suggested Citation

  • Sherrill Shaffer, 2007. "Aggregate concentration and the cost of systemic risk," Applied Economics Letters, Taylor & Francis Journals, vol. 14(6), pages 425-428.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:6:p:425-428
    DOI: 10.1080/13504850500438751
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    References listed on IDEAS

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    1. Lawrence J. White, 2002. "Trends in Aggregate Concentration in the United States," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 137-160, Fall.
    2. Lieberman, Marvin B, 1987. "Excess Capacity as a Barrier to Entry: An Empirical Appraisal," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 607-627, June.
    3. Jackson, William E, III, 1992. "Is the Market Well Defined in Bank Merger and Acquisition Analysis?," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 655-661, November.
    4. White, Michelle J, 1983. "Bankruptcy Costs and the New Bankruptcy Code," Journal of Finance, American Finance Association, vol. 38(2), pages 477-488, May.
    5. Charles W. Calomiris & Joseph R. Mason, 2003. "Consequences of Bank Distress During the Great Depression," American Economic Review, American Economic Association, vol. 93(3), pages 937-947, June.
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