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Has the U.S. Finance Industry Become Less Efficient?

Authors: Philippon, Thomas
Issue Date: 13-Dec-2011
Series/Report no.: FIN-11-037
Abstract: I use the neoclassical growth model to study financial intermediation in the U.S. over the past 140 years. I measure the cost of intermediation on the one hand, and the production of assets and liquidity services on the other. Surprisingly, the model suggests that the finance industry has become less efficient: the unit cost of intermediation is higher today than it was a century ago. Improvements in information technology seem to have been cancelled out by increases in trading activities whose social value is difficult to assess.
Appears in Collections:Finance Working Papers

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