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

Thomas Philippon

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

December 2011

NYU Working Paper No. 2451/31370

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.

Number of Pages in PDF File: 28

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Date posted: December 15, 2011  

Suggested Citation

Philippon, Thomas, Has the U.S. Finance Industry Become Less Efficient? (December 2011). NYU Working Paper No. 2451/31370. Available at SSRN: http://ssrn.com/abstract=1972808

Contact Information

Thomas Philippon (Contact Author)
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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