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Landed Interests and Financial Underdevelopment in the United States

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  • Raghuram G. Rajan
  • Rodney Ramcharan

Abstract

Landed elites in the United States in the early decades of the twentieth century played a significant role in restricting the development of finance. States that had higher land concentration passed more restrictive banking legislation. At the county level, counties with very concentrated land holdings tended to have disproportionately fewer banks per capita. Banks were especially scarce both when landed elites' incentive to suppress finance, as well as their ability to exercise local influence, was higher. Finally, the resulting financial underdevelopment was negatively correlated with subsequent manufacturing growth. We draw lessons from this episode for understanding economic development.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14347.

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Date of creation: Sep 2008
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Handle: RePEc:nbr:nberwo:14347

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Cited by:
  1. Madestam, Andreas, 2014. "Informal finance: A theory of moneylenders," Journal of Development Economics, Elsevier, vol. 107(C), pages 157-174.
  2. Dietz Vollrath, 2008. "Agrarian Structure and Endogenous Financial System Development," Working Papers 2008-02, Department of Economics, University of Houston.
  3. Stephen Haber & Enrico Perotti, 2008. "The Political Economy of Financial Systems," Tinbergen Institute Discussion Papers 08-045/2, Tinbergen Institute.
  4. Hauner, David & Prati, Alessandro & Bircan, Cagatay, 2013. "The interest group theory of financial development: Evidence from regulation," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 895-906.

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