Hostname: page-component-7c8c6479df-ws8qp Total loading time: 0 Render date: 2024-03-28T20:17:55.764Z Has data issue: false hasContentIssue false

American Banking and the Transportation Revolution before the Civil War

Published online by Cambridge University Press:  27 November 2014

Jeremy Atack
Affiliation:
Professor Emeritus and Research Professor, Department of Economics, Box 351819, Vanderbilt University, Nashville, TN 37235. E-mail: jeremy.atack@vanderbilt.edu.
Matthew Jaremski
Affiliation:
Assistant Professor, Department of Economics, Colgate University, 13 Oak Drive, Hamilton NY 13346. E-mail: mjaremski@colgate.edu.
Peter L. Rousseau
Affiliation:
Professor, Department of Economics, Box 351819, Vanderbilt University, Nashville, TN 37235. E-mail: peter.l.rousseau@vanderbilt.edu.

Abstract

Studies have shown a connection between finance and growth, but most do not consider how financial and real factors interact to put a virtuous cycle of economic development into motion. As the main transportation advance of the nineteenth century, railroads connected established commercial centers and made unsettled areas along their routes better candidates for development. We measure the strength of links between railroads and banks in seven Midwest states using an annual transportation geographic information system (GIS) database linked to a census of banking. These data indicate that those counties that already had a bank were more likely to see their first railroad go through over the next decade, while new banks tended to enter a county a year or two after a railroad was built. The initial banking system thus helped establish the rail system, while the rapid expansion of railroads helped fill in the banking map of the American Midwest.

Type
Articles
Copyright
Copyright © The Economic History Association 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We acknowledge the helpful comments from the editor of this JOURNAL Paul Rhode, and its anonymous referees as well as those by participants at the 7th World Congress of Cliometrics, the 2013 Economic History Association meetings (especially our discussant Peter Temin), and Williams College.

References

BIBLIOGRAPHY

American Railroad Journal. American railroad journal, and advocate of internal improvements. New York. 18321887.Google Scholar
Anonymous. History of Macomb County, Michigan: containing an account of its settlement, growth, development and resources, churches, schools and societies; portraits of prominent men and early settlers, Chicago: Leeson, 1882.Google Scholar
Appleton and Company. Appletons’ illustrated railway and steam navigation guide, New York, NY: D. Appleton & Co., 1847.Google Scholar
Atack, Jeremy, “On the Use of Geographic Information Systems in Economic History: The American Transportation Revolution Revisited.” The Journal of Economic History 73, no. 2 (2013): 313–38.CrossRefGoogle Scholar
Atack, Jeremy, Bateman, Fred, Haines, Michael, and Margo, Robert A.. “Did Railroads Induce or Follow Economic Growth? Urbanization and Population Growth in the American Midwest, 1850–1860.” Social Science History 34, no. 2 (2010): 171–97.Google Scholar
Atack, Jeremy, Haines, Michael, and Margo, Robert A.. Railroads and the Rise of the Factory: Evidence for the United States, 1850–1870. In Economic Evolution and Revolutions in Historical Time, edited by Rhode, Paul, Rosenbloom, Joshua, and Weiman, David (eds.), 162–79. Palo Alto: Stanford University Press, 2011.Google Scholar
Atack, Jeremy, and Jaremski, Matthew. “Quantifying Wildcat Banking.” Unpublished working paper Vanderbilt University; Colgate University: 2012.Google Scholar
Atack, Jeremy, and Margo, Robert A.. “The Impact of Access to Rail Transportation on Agricultural Improvement: The American Midwest as a Test Case, 1850–1860.” Journal of Transport and Land Use 4, no. 2 (2011): 518.CrossRefGoogle Scholar
Bodenhorn, Howard, and Cuberes, David. “Financial Development and City Growth: Evidence from Northeastern American Cities, 1790–1870.” NBER Working Papers 15997. Cambridge, MA: 2010 Google Scholar
Bordo, Michael D., and Rousseau, Peter. L.Historical Evidence on the Finance-Trade-Growth Nexus.” Journal of Banking and Finance 36, no. 4 (2012): 1236–43.CrossRefGoogle Scholar
Burton, Clarence Monroe, Burton, M. Agnes, Blue, Herbert Tenney Orren, and Miller, Gordon K. (eds.) History of Wayne County and the City of Detroit, Michigan: Chicago, Detroit, S.J. Clarke Pub. Co. 1930.Google Scholar
Callender, G. S.The Early Transportation and Banking Enterprises of the States in Relation to the Growth of Corporations.” The Quarterly Journal of Economics 17, no. 1 (1902): 111–62.CrossRefGoogle Scholar
Carter, Susan B., Gartner, Scott Sigmund, Haines, Michael R., Olmstead, Alan L., Sutch, Richard, Wright, Gavin, and Cain, Louis P.. Historical Statistics of the United States Millennial Edition Online. New York, NY: Cambridge University Press, 2006.Google Scholar
Cobb, Charles. American Railway Guide, and Pocket Companion for the United States … Together with a Complete Railway Map, New York: C. Dinsmore & Co., 1853.Google Scholar
Cronon, William. Nature's Metropolis: Chicago and the Great West. New York: W. W. Norton, 1991.Google Scholar
Disturnell, John. Disturnell's Guide through the Middle, Northern, and Eastern States Containing a Description of the Principal Places, Canal, Railroad, and Steamboat Routes, Tables of Distances, etc.: Compiled from Authentic Sources. New York: J. Disturnell, 1847.Google Scholar
Doggett, John. Doggett's Railroad Guide and Gazetteer for—1848—with Sectional Maps of the Great Routes of Travel. New York, NY: John Doggett Jr., 1848.Google Scholar
Donaldson, Dave, and Hornbeck, Richard. “Railroads and American Economic Growth: A ‘Market Access’ Approach.” Unpublished Working Paper, Harvard University, Department of Economics. Cambridge, MA: Harvard University, 2012.Google Scholar
Dunbar, Willis Frederick. All Aboard! A History of Railroads in Michigan. Grand Rapids, MI: W. B. Eerdmans Pub. Co., 1969.Google Scholar
Dwyer, Gerald, and Hasan, Iftekhar. “Suspensions of Payments, Bank Failures and the Nonbank Publics’ Losses.” Journal of Monetary Economics 54, no. 2 (2007): 565–80.CrossRefGoogle Scholar
Economopoulos, Andrew J.Illinois Free Banking Experience.” Journal of Money, Credit, and Banking 20, no. 2 (1988): 249–64.CrossRefGoogle Scholar
Fishlow, Albert. American Railroads and the Transformation of the Antebellum Economy. Cambridge, MA: Harvard University Press, 1965.Google Scholar
Fogel, Robert William. Railroads and American Economic Growth: Essays in Econometric History. Baltimore, MD: Johns Hopkins Press, 1964.Google Scholar
Goodrich, Carter (ed.) Canals and American Economic Development. New York, NY: Columbia University Press, 1961.Google Scholar
Grossman, James R., Keating, Ann Durkin, and Reiff, Janice L.. The Encyclopedia of Chicago. Chicago, IL: University of Chicago Press, 2004.Google Scholar
Haines, Michael R., and Inter-University Consortium for Political and Social Research. Historical, Demographic, Economic, and Social Data: The United States, 1790–2002. Ann Arbor, MI: Inter-university Consortium for Political and Social Research (ICPSR), 2010.Google Scholar
Haites, Erik F., Mak, James, and Walton, Gary M.. Western River Transportation: The Era of Early Internal Development, 1810–1860. Baltimore, MD: The Johns Hopkins University Press, 1975.Google Scholar
Hammond, Bray. Banks and Politics in America, from the Revolution to the Civil War. Princeton, NJ: Princeton University Press, 1957.Google Scholar
Hornbeck, Richard, “Barbed Wire: Property Rights and Agricultural Development.” Quarterly Journal of Economics 125, no. 2 (2010): 767810.CrossRefGoogle Scholar
Hunter, Louis C. Steamboats on the Western Rivers; An Economic and Technological History. Cambridge, MA: Harvard University Press, 1949.Google Scholar
Indiana. An Act establishing a State Bank. (Passed January 24, 1834). Indiana Revised Statutes. Indianapolis, IN: Douglas & Noel, 1838.Google Scholar
Inter-University Consortium for Political and Social Research. Historical, Demographic, Economic, and Social Data: The United States, 1790–1970. Ann Arbor, MI: ICPSR, 1979.Google Scholar
James, John A. “Banking Market Structure, Risk, and the Pattern of Local Interest Rates in the United States, 1893–1911.” The Review of Economics and Statistics 58, no. 4 (1976): 453–62.CrossRefGoogle Scholar
Jaremski, Matthew, “Free Bank Failures: Risky Bonds vs. Undiversified Portfolios.” Journal of Money, Credit, and Banking 42, no. 8 (2010): 1565–87.CrossRefGoogle Scholar
Jaremski, Matthew, and Rousseau, Peter L.. “Banks, Free Banks and Economic Growth.” Economic Inquiry 51, no. 2 (2013): 1603–21.CrossRefGoogle Scholar
Levine, Ross, “Financial Development and Economic Growth: Views and Agenda.” Journal of Economic Literature 35, no. 2 (1997): 688726.Google Scholar
Levine, Ross. Finance and Growth: Theory and Evidence. In Handbook of Economic Growth, edited by Aghion, Philippe and Durlauf, Steven N. (eds.), 865934. Amsterdam: North-Holland, 2005.Google Scholar
Lloyd, E. Lloyd's American Guide: Containing New Arranged Time Tables, So Simple and Correct That a Child Can Understand Them. Philadelphia, PA: E. Lloyd, 1857.Google Scholar
Meints, Graydon M. Michigan Railroad Lines. East Lansing, MI: Michigan State University Press, 2005.Google Scholar
Merchant and Bankers’ Almanac. The Merchants and Bankers’ Almanac. New York: J. S. Homans, s.d.Google Scholar
Minnesota Population Center. “National Historical Geographic Information System: Version 2.0.” University of Minnesota Population Center: 2011. Available at http://www.nhgis.org.Google Scholar
Paxson, Frederic L.The Railroads of the “Old Northwest” before the Civil War.” Transactions of the Wisconsin Academy of Sciences, Arts, and Letters 17, no. 1 (1914): 247–74.Google Scholar
Poor, Henry Varnum. American railroad journal, and advocate of internal improvements [Online]. New York: s.n. Available at http://digital.library.umsystem.edu/cgi/t/text/text-idx?page=home;c=arj.Google Scholar
Poor, Henry Varnum. History of the Railroads and Canals of the United States of America. New York, NY: A. M. Kelley, 1970.Google Scholar
Riley, Shawn J., Degloria, Stephen D., and Elliot, Robert. “A Terrain Ruggedness Index That Quantifies Topographic Heterogeneity.” Intermountain Journal of Sciences 5, no. 1–4 (1999): 2327.Google Scholar
Rockoff, Hugh. “The Free Banking Era: A Reexamination.” Journal of Money, Credit, and Banking 6, no. 2 (1974): 141–67.CrossRefGoogle Scholar
Rolnick, Arthur J., and Weber, Warren E.New Evidence on the Free Banking Era.” The American Economic Review 73, no. 5 (1983): 1080–91.Google Scholar
Rolnick, Arthur J., and Weber, Warren. E.The Causes of Free Bank Failures: A Detailed Examination.” Journal of Monetary Economics 14, no. 3 (1984): 267–91.CrossRefGoogle Scholar
Rousseau, Peter L., and Sylla, Richard. “Emerging Financial Markets and Early U.S. Growth.” Explorations in Economic History 42, no. 1 (2005): 126.CrossRefGoogle Scholar
Rousseau, Peter L. and Wachtel, Paul. “Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries.” Journal of Money, Credit, and Banking 30, no. 4 (1998): 657–78.CrossRefGoogle Scholar
Sappington, J. Mark, Longshore, Kathleen M., and Thompson, Daniel B.. “Quantifying Landscape Ruggedness for Animal Habitat Analysis: A Case Study Using Bighorn Sheep in the Mojave Desert.” Journal of Wildlife Management 71, no. 5 (2007): 1419–26.CrossRefGoogle Scholar
Segal, Harvey H. Cycles of Canal Construction. In Canals and American Economic Development, edited by Goodrich, C. (ed.) 169215. New York: Columbia University Press, 1961.CrossRefGoogle Scholar
Stover, John F. History of the Baltimore and Ohio Railroad. West Lafayette, IN: Purdue University Press, 1987.Google Scholar
Sullivan, Richard. Regulatory Changes and the Development of the U.S. Banking Market, 1870–1914: A Study of Profit Rates and Risk in National Banks. In The Origin and Development of Financial Institutions and Markets, edited by Atack, Jeremy and Neal, Larry D. (eds.), 262–93. Cambridge, UK: Cambridge University Press, 2007.Google Scholar
Sylla, Richard. “Federal Policy, Banking Market Structure, and Capital Mobilization in the United States, 1863–1913.” The Journal of Economic History 29, no. 4 (1969): 657–86.CrossRefGoogle Scholar
Taylor, George Rogers. and Neu, Irene D.. The American Railroad Network, 1861–1890. Cambridge, MA: Harvard University Press, 1956.CrossRefGoogle Scholar
Thorndale, William, and Dollarhide, William. Map Guide to the U.S. Federal Censuses, 1790–1920. Baltimore, MD: Genealogical Publishing Co., 1987.Google Scholar
Utley, H.MThe Wild Cat Banking System of Michigan.” Pioneer Collections of the Pioneer Society of the State of Michigan 5 (1884: 209–22.Google Scholar
Weber, Warren E.Census of State Banks.” Federal Reserve Bank of Minneapolis: 2005. Available at http://www.minneapolisfed.org/research/economists/wewproj.cfm.Google Scholar
White, Horace. Money and Banking, Illustrated by American history, Boston, MA: Ginn and Company, 1902.Google Scholar
Whitford, Noble E. History of the Canal System of the State of New York, Together with Brief Histories of the Canals of the United States and Canada. Supplement to the Annual Report of the Engineer and Surveyor of the State of New York. Albany, NY: Brandow Printing Co., 1906.Google Scholar