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Institutions, Financial Development, And Pathways Of Growth: The United States From 1900 To 1940

Author

Listed:
  • Rajeev Dehejia

    (Columbia University)

  • Adriana Lleras-Muney

    (Princeton University)

Abstract

There is a substantial literature arguing that financial development contributes to economic growth. In this paper, we contribute to this literature by examining the effect of state-level banking regulation on financial development and economic growth in the United States from 1900 to 1940. Specifically, we make three contributions. First, drawing on the banking history literature, we carefully control for factors that could confound a causal interpretation of the effect of financial development on growth. Second, drawing on available data for this period, we examine the pathways through which financial development can affect growth; in particular, we examine the impact of these banking regulations on a range of farm, manufacturing, and human capital outcomes. Third, we document that not all forms of financial development have a positive effect on economic growth. In particular indiscriminate lending can negatively impact economic growth.

Suggested Citation

  • Rajeev Dehejia & Adriana Lleras-Muney, 2002. "Institutions, Financial Development, And Pathways Of Growth: The United States From 1900 To 1940," Working Papers 258, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
    • Handle: RePEc:pri:cheawb:24
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    More about this item

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N2 - Economic History - - Financial Markets and Institutions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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