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Title: Land Concentration and Financial Development: The Political Economy of Bank Formation in the Postbellum United States
Citation Type: Miscellaneous
Publication Year: 2012
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Abstract: Studying the United States in 1920 and 1930, Rajan and Ramcharan (2011) show that counties with highly concentrated agricultural land holdings had fewer banks. They argue that wealthy landowners stalled financial development in order to prevent poor farmers and tenants from moving up the agricultural ladder. The lack of data, however, forced the authors to examine a period when agriculture was no longer the dominant industry, most every county had a bank, and the federal government had begun to provide agricultural credit through the Farm Loan Board. To observe landowners at the height of their power and banks during the period when they were being introduced, we make use of a new panel database stretching from 1860 to 1900 to test the connection between land concentration and financial development. The data indicate that landed elites encouraged financial development in agricultural areas before 1900. The effect, especially in the South, tends to be focused around national banks rather than state banks, suggesting that owners might have encouraged certain types of banks. The negative correlation in the 1920s thus seems to have been the result of changes in the agricultural and financial sectors that occurred after 1900. After accounting for Federal lending agreements, climate, and county-level production, the negative correlation becomes statistically insignificant if not positive.
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Authors: Fishback, Price V.; Jaremski, Matthew
Publisher: Rutgers University
Data Collections: IPUMS USA
Topics: Housing and Segregation, Migration and Immigration
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