Corpus ID: 6312227

The Evolution of the US Financial Industry from 1860 to 2007 : Theory and Evidence . ∗

@inproceedings{Philippon2008TheEO,
  title={The Evolution of the US Financial Industry from 1860 to 2007 : Theory and Evidence . ∗},
  author={Thomas Philippon},
  year={2008}
}
The share of finance in U.S. GDP displays large historical variations. I argue, using evidence and theory, that corporate finance is a key factor behind these evolutions. Corporate demand for intermediation depends crucially on the relative investment opportunities of firms with low cash flows (young firms) and firms with high cash flows (incumbents). A simple general equilibrium model is developed in order to separate demand and supply factors in the market for financial intermediation. The… 
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