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

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

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 20032.

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Date of creation: Apr 2014
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Publication status: Forthcoming: Did Railroads Make Antebellum U.S. Banks More Sound? , Jeremy Atack, Matthew S. Jaremski, Peter L. Rousseau. in Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective , Collins and Margo. 2014
Handle: RePEc:nbr:nberwo:20032
Note: DAE
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  1. Howard Bodenhorn, 1998. "Quis Custodiet Ipsos Custodes?," Eastern Economic Journal, Eastern Economic Association, vol. 24(1), pages 7-24, Winter.
  2. Richard Hornbeck, 2010. "Barbed Wire: Property Rights and Agricultural Development," The Quarterly Journal of Economics, MIT Press, vol. 125(2), pages 767-810, May.
  3. 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 657-78, November.
  4. Robert A. Margo & Jeremy Atack, 2010. "The Impact of Access to Rail Transportation on Agricultural Improvement: The American Midwest as a Test Case, 1850-1860," Boston University - Department of Economics - Working Papers Series WP2010-026, Boston University - Department of Economics.
  5. 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.
  6. Rockoff, Hugh, 1974. "The Free Banking Era: A Reexamination," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(2), pages 141-67, May.
  7. 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.
  8. 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.
  9. Gerald P. Dwyer, Jr., 1996. "Wildcat banking, banking panics, and free banking in the United States," Economic Review, Federal Reserve Bank of Atlanta, issue Dec, pages 1-20.
  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. 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," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-178, Boston University - Department of Economics.
  12. Economopoulos, Andrew J, 1988. "Illinois Free Banking Experience," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 249-64, May.
  13. 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.
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