The Social Value of Financial Expertise

Pablo Kurlat ()

No 134, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: I study expertise acquisition in a model of trading under asymmetric information. I propose and implement a method to measure r, the ratio of the marginal social value to the marginal private value of expertise. This can be decomposed into three sufficient statistics: traders’ average profits, the fraction of bad assets among traded assets and the elasticity of good assets traded with respect to capital inflows. For junk bond underwriting I measure r = 0.18 and for venture capital I measure r = 0.73. In both cases this is less than one, which implies that marginal investments in expertise destroy surplus.

Date: 2017
New Economics Papers: this item is included in nep-ifn
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Related works:
Journal Article: The Social Value of Financial Expertise (2019)
Working Paper: The Social Value of Financial Expertise (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:134

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