equilibrium size of the financial sector
By: Thomas Philippon.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 13405.; Working paper series (National Bureau of Economic Research) -- working paper no. 13405.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 25
Subjects: Corporations -- United States -- Finance -- Mathematical models; Equilibrium (Economics)
Description: Over the past 60 years, the value added of the U.S. financial sector has grown from 2.3% to 7.7% of GDP. I present a model of the equilibrium size of this industry and I study the factors that might explain its evolution. According to the model, a shift in the joint distribution of cash flows and investment opportunities across U.S. firms has increased the demand for financial services. Improvements in the relative efficiency of the finance industry also play a role. Without these improvements, a much larger fraction of firms would be financially constrained today.
Notes: "September 2007"

Includes bibliographical references (p. 22-23).

Also available in PDF from the NBER World Wide Web site (www.nber.org).