28 Pages Posted: 15 Dec 2011
Date Written: December 2011
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.
Suggested Citation: Suggested Citation
Philippon, Thomas, Has the U.S. Finance Industry Become Less Efficient? (December 2011). NYU Working Paper No. 2451/31370. Available at SSRN: https://ssrn.com/abstract=1972808
By Andrew Lo