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The Limited Partnership in New York, 1822-1853: Partnerships without Kinship

  • Eric Hilt
  • Katharine E. O'Banion

In 1822, New York became the first common-law state to authorize the formation of limited partnerships, and over the ensuing decades, many other states followed. Most prior research has suggested that these statutes were utilized only rarely, but little is known about their effects. Using newly collected data, this paper analyzes the use of the limited partnership in nineteenth-century New York City. We find that the limited partnership form was adopted by a surprising number of firms, and that limited partnerships had more capital, failed at lower rates, and were less likely to be formed on the basis of kinship ties, compared to ordinary partnerships. The latter differences were not simply due to selection: even though the merchants who invested in limited partnerships were a wealthy and successful elite, their own ordinary partnerships were quite different from their limited partnerships. The results suggest that the limited partnership facilitated investments outside kinship networks, and into the hands of talented young merchants.

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File URL: http://www.nber.org/papers/w14412.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14412.

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Date of creation: Oct 2008
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Publication status: published as Hilt, Eric & O'Banion, Katharine, 2009. "The Limited Partnership in New York, 1822?1858: Partnerships Without Kinship," The Journal of Economic History, Cambridge University Press, vol. 69(03), pages 615-645, September.
Handle: RePEc:nbr:nberwo:14412
Note: DAE LE
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