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If financial development matters, then how? National banks in the United States 1870-1900

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Author Info

  • Scott Fulford

    (Boston College)

Abstract

What financial services matter for growth? This paper examines the effects national banks had on growth in the United States from 1870-1900. These banks were commercial not investment banks: they made short term loans and could not take land as collateral. I use the discontinuity in entry caused by a large minimum capital requirement to identify the effects of banking. Counties getting a bank increased production per person substantially and tilted production towards agriculture over manufacturing by expanding land under cultivation, not improving yields. The effects are highly persistent and show that the commercial activities of banks matter for growth.

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 753.

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Date of creation: 01 Sep 2010
Date of revision: 15 May 2012
Handle: RePEc:boc:bocoec:753

Note: Previously circulated as "Gilded or gold? National banks and development in the United States 1870-1900"
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Keywords: National banks; commercial banking; development; growth;

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  1. Galor, Oded & Moav, Omer, 1999. "From Physical to Human Capital Accumulation: Inequality in the Process of Development," CEPR Discussion Papers 2307, C.E.P.R. Discussion Papers.
  2. Scott Fulford, 2010. "The effects of financial development in the short and long run," Boston College Working Papers in Economics 741, Boston College Department of Economics, revised 31 May 2011.
  3. James, John A, 1976. "Banking Market Structure, Risk, and the Pattern of Local Interest Rates in the United States, 1893-1911," The Review of Economics and Statistics, MIT Press, vol. 58(4), pages 453-62, November.
  4. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  5. Robert M. Townsend & Kenichi Ueda, 2006. "Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 251-293.
  6. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  7. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Jeremy Atack & Fred Bateman & Michael Haines & Robert A. Margo, 2009. "Did Railroads Induce or Follow Economic Growth? Urbanization and Population Growth in the American Midwest, 1850-60," NBER Working Papers 14640, National Bureau of Economic Research, Inc.
  9. Bodenhorn,Howard, 2000. "A History of Banking in Antebellum America," Cambridge Books, Cambridge University Press, number 9780521669993, November.
  10. Rockoff, Hugh T., 1975. "Varieties of Banking and Regional Economic Development in the United States, 1840–1860," The Journal of Economic History, Cambridge University Press, vol. 35(01), pages 160-181, March.
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Cited by:
  1. Matthew Jaremski & Peter Rousseau, 2012. "Banks, free banks, and U.S. economic growth," Vanderbilt University Department of Economics Working Papers vuecon-12-00012, Vanderbilt University Department of Economics.
  2. repec:van:wpaper:vuecon-sub-12-00014 is not listed on IDEAS
  3. Pere Arqué-Castells & Elisabet Viladecans-Marsal, 2013. "Banking towards development: Evidence from the Spanish banking expansion plan," Working Papers 2013/8, Institut d'Economia de Barcelona (IEB).

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