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Banking and Industrialization

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  • Stephan Heblich

    () (University of Bristol)

  • Alex Trew

    () (University of St. Andrews)

Abstract

We establish a causal role for banking access in the spread of the Industrial Revolution over the period 1817–1881 by exploiting unique employment data from 10,528 parishes across England and Wales and a novel instrument. We estimate that a one standard deviation increase in 1817 finance employment increases annualized industrial employment growth by 0.93 percentage points. We establish the role of structural transformation as an underlying growth mechanism and show that banking access: (i) increases the industrial employment share; (ii) stimulates urbanization; and (iii) fosters inter-industry transition to high TFP, intermediate and capital-intensive sub-sectors.

Suggested Citation

  • Stephan Heblich & Alex Trew, 2015. "Banking and Industrialization," Discussion Paper Series, School of Economics and Finance 201506, School of Economics and Finance, University of St Andrews, revised 01 Dec 2017.
  • Handle: RePEc:san:wpecon:1506
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    Cited by:

    1. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, vol. 100(4), pages 1875-1891, September.
    2. Howard Bodenhorn, 2016. "Two Centuries of Finance and Growth in the United States, 1790-1980," Working Papers id:11352, eSocialSciences.
    3. Braun, Sebastian Till & Franke, Richard, 2019. "Railways, Growth, and Industrialisation in a Developing German Economy, 1829-1910," MPRA Paper 93644, University Library of Munich, Germany.
    4. Lehmann-Hasemeyer, Sibylle H. & Wahl, Fabian, 2017. "Savings banks and the industrial revolution in Prussia: Supporting regional development with public financial institutions," Hohenheim Discussion Papers in Business, Economics and Social Sciences 18-2017, University of Hohenheim, Faculty of Business, Economics and Social Sciences.

    More about this item

    Keywords

    Banking; industrial revolution; structural transformation; regional economic growth; urbanization.;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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