The Consequences of Financial Innovation: A Counterfactual Research Agenda

Josh Lerner and Peter Tufano

in The Rate and Direction of Inventive Activity Revisited

Published by University of Chicago Press

Published in print April 2012 | ISBN: 9780226473031
Published online February 2013 | e-ISBN: 9780226473062 | DOI:
The Consequences of Financial Innovation: A Counterfactual Research Agenda

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This chapter explores the broader impacts of financial innovation. It looks at the literatures on financial innovation, and at the similarities and differences between financial innovation and other forms of innovation. The chapter proposes a research agenda to systematically address the social welfare implications of financial innovation. This class of breakthroughs that attracted no real discussion in the 1962 volume has broad impacts: not only do financial services represent a signify cant economic share (estimates in the United States run as high as over 30 percent), but in an ideal world, they enable households to have new choices for investment and consumption, and firms to raise capital in larger amounts and at a lower cost than they otherwise could.

Keywords: financial innovation; social welfare; global financial crisis; investment; consumption

Chapter.  24885 words. 

Subjects: Economic Development and Growth

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