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Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation

Listed author(s):
  • Thomas Philippon

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)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 105 (2015)
Issue (Month): 4 (April)
Pages: 1408-1438

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Handle: RePEc:aea:aecrev:v:105:y:2015:i:4:p:1408-38
Note: DOI: 10.1257/aer.20120578
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