Technology and Intermediation: The Case of Banking

The aim of this paper is to look at ways in which the contribution of investment in technology to consumer welfare might be measured. One useful approach to this question is demonstrated by means of a simple spatial model of trade and transportation. The model is used to elaborate on a discussion found in Melvin (1990). The empirical part of the paper deals with the banking sector. A key function of the banking system is to facilitate intermediation between borrowers and lenders.