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Financial development and city growth: Evidence from Northeastern American cities, 1790-1870

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  • Howard Bodenhorn

    ()
    (Clemson University)

  • David Cuberes

    ()
    (University of Alicante)

Abstract

We find a positive and strong correlation between financial development and subsequent city growth in the Northeastern United States between 1790 and 1870. The correlation is robust to controls for geographical characteristics of the city, the percentage of population working in different sectors, and its initial population. Our estimates suggest that the presence of a bank at a given location increases its subsequent growth by one to two percentage points per year. Because urban growth was correlated with economic development in the nineteenth-century US, we believe our results provide further support for the finance-growth nexus.

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Bibliographic Info

Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2010/35.

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Length: 42 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:ieb:wpaper:2010/9/doc2010-35

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References

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  1. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  2. Rajeev H. Dehejia & Sadek Wahba, 1998. "Propensity Score Matching Methods for Non-experimental Causal Studies," NBER Working Papers 6829, National Bureau of Economic Research, Inc.
  3. Howard Bodenhorn, 2004. "Free Banking and Bank Entry in Nineteenth-Century New York," NBER Working Papers 10654, National Bureau of Economic Research, Inc.
  4. Edward L. Glaeser & William R. Kerr, 2008. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Harvard Business School Working Papers 09-055, Harvard Business School.
  5. Weiman, David F., 1988. "Urban Growth on the Periphery of the Antebellum Cotton Belt: Atlanta, 1847–1860," The Journal of Economic History, Cambridge University Press, vol. 48(02), pages 259-272, June.
  6. Sukkoo Kim, 2000. "Urban Development in the United States, 1690–1990," Southern Economic Journal, Southern Economic Association, vol. 66(4), pages 855-880, April.
  7. Luigi Benfratello & Fabio Schiantarelli & Alessandro Sembenelli, 2005. "Banks and Innovation: Microeconometric Evidence on Italian Firms," Boston College Working Papers in Economics 631, Boston College Department of Economics, revised 13 Jun 2007.
  8. Edward L. Glaeser & Jose A. Scheinkman & Andrei Shleifer, 1995. "Economic Growth in a Cross-Section of Cities," NBER Working Papers 5013, National Bureau of Economic Research, Inc.
  9. Edward L. Glaeser & Sari Pekkala Kerr & William R. Kerr, 2013. "Entrepreneurship And Urban Growth:An Empirical Assessment With Historical Mines," Working Papers 13-15, Center for Economic Studies, U.S. Census Bureau.
  10. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," NBER Working Papers 14806, National Bureau of Economic Research, Inc.
  11. Taylor, George Rogers, 1967. "American Urban Growth Preceding the Railway Age," The Journal of Economic History, Cambridge University Press, vol. 27(03), pages 309-339, September.
  12. Crowther, Simeon J., 1976. "Urban Growth in the Mid-Atlantic States, 1785–1850," The Journal of Economic History, Cambridge University Press, vol. 36(03), pages 624-644, September.
  13. Federico Cingano & Fabiano Schivardi, 2003. "Identifying the Sources of Local Productivity Growth," Temi di discussione (Economic working papers) 474, Bank of Italy, Economic Research and International Relations Area.
  14. Edward L. Glaeser & Stuart S. Rosenthal & William C. Strange, 2009. "Urban Economics and Entrepreneurship," NBER Working Papers 15536, National Bureau of Economic Research, Inc.
  15. Chen, Henry & Gompers, Paul & Kovner, Anna & Lerner, Josh, 2010. "Buy local? The geography of venture capital," Journal of Urban Economics, Elsevier, vol. 67(1), pages 90-102, January.
  16. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
  17. Weber, Warren E., 2006. "Early State Banks in the United States: How Many Were There and When Did They Exist?," The Journal of Economic History, Cambridge University Press, vol. 66(02), pages 433-455, June.
  18. Scott Fulford, 2010. "If financial development matters, then how? National banks in the United States 1870-1900," Boston College Working Papers in Economics 753, Boston College Department of Economics, revised 15 May 2012.
  19. repec:fth:stanho:e-95-4 is not listed on IDEAS
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Citations

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Cited by:
  1. Philipp Ager & Fabrizio Spargoli, 2013. "Bank Deregulation, Competition and Economic Growth: The US Free Banking Experience," Working Papers 0050, European Historical Economics Society (EHES).
  2. Erik Hornung, 2012. "Human Capital, Technology Diffusion, and Economic Growth - Evidence from Prussian Census Data," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, number 46, July.
  3. Matthew Jaremski & Peter L. Rousseau, 2012. "Banks, Free Banks, and U.S. Economic Growth," NBER Working Papers 18021, National Bureau of Economic Research, Inc.
  4. repec:cge:warwcg:79 is not listed on IDEAS
  5. repec:cge:warwcg:180 is not listed on IDEAS
  6. repec:cge:warwcg:181 is not listed on IDEAS
  7. Alberto Basso & David Cuberes, 2013. "Fertility and Financial Development: Evidence from U.S. Counties in the 19th Century," Working Papers 2013011, The University of Sheffield, Department of Economics.
  8. Hornung, Erik, 2012. "Railroads and Micro-regional Growth in Prussia," CAGE Online Working Paper Series 80, Competitive Advantage in the Global Economy (CAGE).
  9. repec:van:wpaper:vuecon-sub-12-00014 is not listed on IDEAS
  10. Matthew S. Jaremski, 2013. "National Banking's Role in U.S. Industrialization, 1850-1900," NBER Working Papers 18789, National Bureau of Economic Research, Inc.
  11. Mitchener, Kris James, 2014. "The Evolution of Bank Supervision: Evidence from U.S. States," CAGE Online Working Paper Series 181, Competitive Advantage in the Global Economy (CAGE).

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