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Did Railroads Make Antebellum U.S. Banks More Sound?

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  • Jeremy Atack
  • Matthew S. Jaremski
  • Peter L. Rousseau

Abstract

We investigate the relationships of bank failures and balance sheet conditions with measures of proximity to different forms of transportation in the United States over the period from 1830-1860. A series of hazard models and bank-level regressions indicate a systematic relationship between proximity to railroads (but not to other means of transportation) and "good" banking outcomes. Although railroads improved economic conditions along their routes, we offer evidence of another channel. Specifically, railroads facilitated better information flows about banks that led to modifications in bank asset composition consistent with reductions in the incidence of moral hazard.

Suggested Citation

  • Jeremy Atack & Matthew S. Jaremski & Peter L. Rousseau, 2014. "Did Railroads Make Antebellum U.S. Banks More Sound?," NBER Working Papers 20032, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20032
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    References listed on IDEAS

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    1. Atack, Jeremy & Jaremski, Matthew & Rousseau, Peter L., 2014. "American Banking and the Transportation Revolution before the Civil War," The Journal of Economic History, Cambridge University Press, vol. 74(04), pages 943-986, December.
    2. Richard Hornbeck, 2010. "Barbed Wire: Property Rights and Agricultural Development," The Quarterly Journal of Economics, Oxford University Press, vol. 125(2), pages 767-810.
    3. Jeremy Atack & Michael R. Haines & Robert A. Margo, 2008. "Railroads and the Rise of the Factory: Evidence for the United States, 1850-70," NBER Working Papers 14410, National Bureau of Economic Research, Inc.
    4. 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.
    5. Atack, Jeremy & Margo, Robert, 2011. "The Impact of Access to Rail Transportation on Agricultural Improvement: The American Midwest as a Test Case, 1850-1860," The Journal of Transport and Land Use, Center for Transportation Studies, University of Minnesota, vol. 4(2), pages 5-18.
    6. Economopoulos, Andrew J, 1988. "Illinois Free Banking Experience," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 249-264, May.
    7. Rolnick, Arthur J. & Weber, Warren E., 1984. "The causes of free bank failures : A detailed examination," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 267-291, November.
    8. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 657-678, November.
    9. Rockoff, Hugh, 1974. "The Free Banking Era: A Reexamination," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(2), pages 141-167, May.
    10. Matthew Jaremski, 2010. "Free Bank Failures: Risky Bonds versus Undiversified Portfolios," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1565-1587, December.
    11. Howard Bodenhorn, 1998. "Quis Custodiet Ipsos Custodes?," Eastern Economic Journal, Eastern Economic Association, vol. 24(1), pages 7-24, Winter.
    12. G. S. Callender, 1902. "The Early Transportation and Banking Enterprises of the States in Relation to the Growth of Corporations," The Quarterly Journal of Economics, Oxford University Press, vol. 17(1), pages 111-162.
    13. Gerald P. Dwyer, 1996. "Wildcat banking, banking panics, and free banking in the United States," Economic Review, Federal Reserve Bank of Atlanta, issue Dec, pages 1-20.
    14. Atack, Jeremy, 2013. "On the Use of Geographic Information Systems in Economic History: The American Transportation Revolution Revisited," The Journal of Economic History, Cambridge University Press, vol. 73(02), pages 313-338, June.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Technology and Financial Inclusion in North America
      by bbatiz in NEP-HIS blog on 2014-07-29 18:53:34

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    Cited by:

    1. Howard Bodenhorn, 2016. "Two Centuries of Finance and Growth in the United States, 1790-1980," Working Papers id:11352, eSocialSciences.
    2. Howard Bodenhorn, 2017. "Finance and Growth: Household Savings, Public Investment, and Public Health in Late Nineteenth-Century New Jersey," NBER Working Papers 23430, National Bureau of Economic Research, Inc.
    3. Stephan Heblich & Alex Trew, 2015. "Banking and Industrialization," CESifo Working Paper Series 5503, CESifo Group Munich.

    More about this item

    JEL classification:

    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N71 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: Pre-1913

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