Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation
- (pp. 1408-38)
Abstract
A quantitative investigation of financial intermediation in the United States over the past 130 years yields the following results: (i) the finance industry's share of gross domestic product (GDP) is high in the 1920s, low in the 1960s, and high again after 1980; (ii) most of these variations can be explained by corresponding changes in the quantity of intermediated assets (equity, household and corporate debt, liquidity); (iii) intermediation has constant returns to scale and an annual cost of 1.5-2 percent of intermediated assets; (iv) secular changes in the characteristics of firms and households are quantitatively important. (JEL D24, E44, G21, G32, N22)Citation
Philippon, Thomas. 2015. "Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation." American Economic Review, 105 (4): 1408-38. DOI: 10.1257/aer.20120578Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- E44 Financial Markets and the Macroeconomy
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- N22 Economic History: Financial Markets and Institutions: U.S.; Canada: 1913-