NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Consequences of Financial Innovation: A Counterfactual Research Agenda

Josh Lerner, Peter Tufano

NBER Working Paper No. 16780
Issued in February 2011
NBER Program(s):   CF   PR

Financial innovation has been both praised as the engine of growth of society and castigated for being the source of the weakness of the economy. In this paper, we review the literature on financial innovation and highlight the similarities and differences between financial innovation and other forms of innovation. We also propose a research agenda to systematically address the social welfare implications of financial innovation. To complement existing empirical and theoretical methods, we propose that scholars examine case studies of systemic (widely adopted) innovations, explicitly considering counterfactual histories had the innovations never been invented or adopted.

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Document Object Identifier (DOI): 10.3386/w16780

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