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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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  1. repec:fth:stanho:e-95-4 is not listed on IDEAS
  2. 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.
  3. 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.
  4. Sukkoo Kim, 2000. "Urban Development in the United States, 1690–1990," Southern Economic Journal, Southern Economic Association, vol. 66(4), pages 855-880, April.
  5. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity score matching methods for non-experimental causal studies," Discussion Papers 0102-14, Columbia University, Department of Economics.
  6. Edward L. Glaeser & Stuart S. Rosenthal & William C. Strange, 2009. "Urban Economics and Entrepreneurship," NBER Working Papers 15536, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. 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.
  10. Edward L. Glaeser & Sari Pekkala Kerr & William R. Kerr, 2012. "Entrepreneurship and Urban Growth: An Empirical Assessment with Historical Mines," Harvard Business School Working Papers 13-015, Harvard Business School.
  11. Glaeser, Edward L. & Scheinkman, JoseA. & Shleifer, Andrei, 1995. "Economic growth in a cross-section of cities," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 117-143, August.
  12. 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.
  13. Edward L. Glaeser & William R. Kerr, 2009. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(3), pages 623-663, 09.
  14. 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.
  15. 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.
  16. 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.
  17. 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.
  18. 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.
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Cited by:
  1. repec:cge:warwcg:79 is not listed on IDEAS
  2. Ager, Philipp & Spargoli, Fabrizio, 2013. "Bank Deregulation, Competition and Economic Growth: The US Free Banking Experience," MPRA Paper 49269, University Library of Munich, Germany.
  3. 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.
  4. Matthew Jaremski & Peter L. Rousseau, 2012. "Banks, Free Banks, and U.S. Economic Growth," NBER Working Papers 18021, National Bureau of Economic Research, Inc.
  5. repec:cge:warwcg:181 is not listed on IDEAS
  6. Erik Hornung, 2012. "Railroads and Micro-regional Growth in Prussia," Ifo Working Paper Series Ifo Working Paper No. 127, Ifo Institute for Economic Research at the University of Munich.
  7. repec:cge:warwcg:180 is not listed on IDEAS
  8. 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).
  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. Philipp Ager & Fabrizio Spargoli, 2013. "Bank Deregulation, Competition and Economic Growth: The US Free Banking Experience," Tinbergen Institute Discussion Papers 13-210/IV/DSF69, Tinbergen Institute.

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