Has the U.S. Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation /

Philippon, Thomas.

Has the U.S. Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation / Thomas Philippon. - Cambridge, Mass. National Bureau of Economic Research 2012. - 1 online resource: illustrations (black and white); - NBER working paper series no. w18077 . - Working Paper Series (National Bureau of Economic Research) no. w18077. .

May 2012.

I provide a quantitative interpretation of financial intermediation in the U.S. over the past 130 years. Measuring separately the cost of intermediation and the production of financial services, I find that: (i) the quantity of intermediation varies a lot over time; (ii) intermediation is produced under constant returns to scale; (iii) the annual cost of intermediation is around 2% of outstanding assets; (iv) adjustments for borrowers' quality are quantitatively important; and (v) the unit cost of intermediation has increased over the past 30 years.




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