NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Thomas Philippon

NBER Working Paper No. 18077
Issued in May 2012
NBER Program(s):   AP   CF   EFG   PR

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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Document Object Identifier (DOI): 10.3386/w18077

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