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Did Inequality in Farm Sizes Lead to Suppression of Banking and Credit in the Late Nineteenth Century?

Published online by Cambridge University Press:  03 April 2018

Matthew Jaremski
Affiliation:
Matthew Jaremski is Associate Professor, Department of Economics, Colgate University, Hamilton, NY 13346 and Faculty Research Fellow, National Bureau of Economic Research. E-mail: mjaremski@colgate.edu.
Price V. Fishback
Affiliation:
Price V. Fishback is Thomas R. Brown Professor of Economics, Department of Economics, University of Arizona, Tucson, AZ 85721 and Faculty Research Fellow, National Bureau of Economic Research. E-mail: pfishback@eller.arizona.edu.

Abstract

This article creates a new database that covers all U.S. banks in the census years between 1870 and 1900 to test the interaction between inequality and financial development when the banking system was starting over from scratch. A fixed-effects panel regression shows that the number of banks per thousand people in the South has a strong positive relationship with the size of farm operations. This suggests that large southern farm operators welcomed new banks after the Civil War. When the analysis is extended into the 1900s, the relationship becomes more negative, as bankers may have tried to block entrants.

Type
Articles
Copyright
Copyright © The Economic History Association 2018 

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Footnotes

The authors would like to thank Ann Carlos, two anonymous referees, Lee Alston, Charles Calomiris, and Kenneth Snowden, as well as participants at Rutgers University and the NBER Development of the American Economy meetings for valuable comments and suggestions.

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