Financial Development and City Growth: Evidence from Northeastern American Cities, 1790-1870
AbstractUsing cross sectional and panel techniques, 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. This positive association is still significant when we control for sample selection. Propensity score matching estimators that compare similar cities in terms of observables and Heckman models that control for unobservables also yield a positive association between finance and urban growth. 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 InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15997.
Date of creation: May 2010
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- Howard Bodenhorn & David Cuberes, 2010. "Financial development and city growth: Evidence from Northeastern American cities, 1790-1870," Working Papers 2010/35, Institut d'Economia de Barcelona (IEB).
- N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
- N90 - Economic History - - Regional and Urban History - - - General, International, or Comparative
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
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