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

  • Scott Fulford

    (Boston College)

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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File URL: http://fmwww.bc.edu/EC-P/wp753.pdf
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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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Web page: http://fmwww.bc.edu/EC/
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  1. 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.
  2. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  3. 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.
  4. Oded Galor & Omer Moav, 1999. "From Physical to Human Capital Accumulation: Inequality in the Process of Development," Working Papers 99-27, Brown University, Department of Economics.
  5. Robert M. Townsend & Kenichi Ueda, 2003. "Financial Deepening, Inequality, and Growth; A Model-Based Quantitative Evaluation," IMF Working Papers 03/193, International Monetary Fund.
  6. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  7. 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.
  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. repec:cup:cbooks:9780521669993 is not listed on IDEAS
  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.
  11. 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.
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