Hostname: page-component-848d4c4894-nr4z6 Total loading time: 0 Render date: 2024-05-17T22:56:40.325Z Has data issue: false hasContentIssue false

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
Matthew Jaremski is Associate Professor, Department of Economics, Colgate University, Hamilton, NY 13346 and Faculty Research Fellow, National Bureau of Economic Research. E-mail:
Price V. Fishback
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:


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.

Copyright © The Economic History Association 2018 

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.)


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.



Acemoglu, Daron, and Robinson, James A.. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. New York: Crown Business, 2012.Google Scholar
Aghion, Philippe, and Bolton, Patrick. “A Theory of Trickle-down Growth and Development.” Review of Economic Studies 64, no. 2 (1997): 151–72.Google Scholar
Banerjee, Abhijit V., and Newman, Andrew F.. “Risk-bearing and the Theory of Income Distribution.” Review of Economic Studies 58, no. 2 (1991): 211–35.Google Scholar
Barnett, George. State Banks and Trust Companies since the Passage of the National-Bank Act. Washington, DC: GPO, 1911.Google Scholar
Bodenhorn, Howard. “A More Perfect Union: Regional Interest Rates in the Twentieth Century United States.” In Anglo-American Financial Systems, edited by Bordo, Michael and Sylla, Richard, 415–53. Burr Ridge, IL: Irwin, 1996. (accessed 23 August 2013).Google Scholar
Bodenhorn, Howard, and Cuberes, David. “Financial Development and City Growth: Evidence from Northeastern American Cities, 1790–1870.” NBER Working Paper No. 15997, Cambridge, MA, May 2010.Google Scholar
Bogue, Allan G. Money at Interest: The Farm Mortgage on the Middle Border. Ithaca, NY: Cornell University Press, 1955.Google Scholar
Board of Governors of the Federal Reserve System. All-Bank Statistics, United States, 1896–1955. Washington, DC: Board of Governors, 1959.Google Scholar
Calomiris, Charles, and Ramirez, Carlos. “The Political Economy of Bank Entry Restrictions: Theory and Evidence from the United States in the 1920s.” Working Paper, Columbia University, New York City, NY, December 2004.Google Scholar
Calomiris, Charles, Jaremski, Matthew, Park, Haelim, et al. “Liquidity Risk, Bank Networks, and the Value of Joining the Fed.” NBER Working Paper No. w21684, Cambridge, MA, 2015.Google Scholar
Carlson, Mark, and Mitchener, Kris James. “Branch Banking, Bank Competition and Financial Stability.” Journal of Money Credit and Banking 38, no. 5 (2006): 1293328.CrossRefGoogle Scholar
Carter, Susan, Gartner, Scott Sigmund, Haines, Michael, et al. Historical Statistics of the United States: Earliest Times to the Present, Millennial Edition. New York: Cambridge University Press, 2006.Google Scholar
Coquillette, Calvin. “The Struggle to Preserve Iowa's State Banking System, 1920–1933.” Annals of Iowa 60 (2001): 3559.CrossRefGoogle Scholar
Daniel, Pete. The Shadow of Slavery: Peonage in the South, 1901–1969. New York: Oxford University Press, 1973.Google Scholar
Davis, Lance. “The Investment Market, 1870–1914: The Evolution of a National Market.” Journal of Economic History 25, no. 3 (1965): 355–99.Google Scholar
Dehejia, Rajeev, and Lleras-Muney, Adriana. “Institutions, Financial Development, and Pathways of Growth: The United States from 1900 to 1940.” Journal of Law and Economics 50 (2007): 239–72.Google Scholar
Doti, Lynne Pierson, and Schweikart, Larry. Banking in the American west: From the gold rush to deregulation. Norman, OK: University of Oklahoma Press, 1991.Google Scholar
Eichengreen, Barry. “Mortgage Rates in the Populist Era.” American Economic Review 74, no. 5 (1984): 9951015.Google Scholar
Eichengreen, Barry. “Agricultural Mortgages in the Populist Era: Reply to Snowden.” Journal of Economic History 47, no. 3 (1987): 757–60.Google Scholar
Engerman, Stanley, Mariscal, Elisa, and Sokoloff, Kenneth. “The Evolution of Schooling Institutions in the Americas, 1800–1925.” UCLA Working Paper, Los Angeles, CA, 2002.Google Scholar
Engerman, Stanley, and Sokoloff, Kenneth. “Factor Endowments, Inequality, and Paths of Development among New World Economies.” Economía 3, no. 1 (2002): 41109.Google Scholar
Federal Deposit Insurance Corporation. “Federal Deposit Insurance Corporation Data on Banks in the United States, 1920–1936.” Ann Arbor, MI: Inter-university Consortium for Political and Social Research, 2001.Google Scholar
Federal Farm Board. Fourteenth Annual Report of the Federal Farm Board for the Year Ending 31 December 1930. Washington, DC: GPO, 1931.Google Scholar
Fishback, Price. “Debt Peonage in Postbellum Georgia.” Explorations in Economic History 26, no. 2 (1989): 219–36.Google Scholar
Fishback, Price, Haines, Michael, and Kantor, Shawn. “The Impact of New Deal Expenditures on Mobility during the Great Depression.” Explorations in Economic History 43, no. 2 (2006): 179222.Google Scholar
FitzRandolph, Peter. “The Rural Furnishing Merchant in the Postbellum United States: A Study in Spatial Economics. Dissertation Summary.” Journal of Economic History 41, no. 1 (1981): 187–88.Google Scholar
Fulford, Scott. “How Important Are Banks for Development? National Banks in the United States 1870–1900.” Review of Economics and Statistics 97, no. 5 (2015): 921–38.Google Scholar
Galor, Oded, and Zeira, Joseph. “Income Distribution and Macroeconomics.” Review of Economic Studies 60, no. 1 (1993): 3552.Google Scholar
Galor, Oded, Moav, Omer, and Vollrath, Dietrich. “Inequality in Land Ownership, the Emergence of Human Capital Promoting Institutions, and the Great Divergence.” Review of Economic Studies 76, no. 1 (2009): 143–79.Google Scholar
Gardner, Bruce. American Agriculture in the Twentieth Century: How it Flourished and What It Costs. Harvard: Harvard University Press, 2002.Google Scholar
Goldin, Claudia. “‘N’ Kinds of Freedom: An Introduction to Issues.” Explorations in Economic History 16, no. 1 (1979): 830.CrossRefGoogle Scholar
Greenwood, Jeremy, and Jovanovic, Boyan. “Financial Development, Growth, and the Distribution of Income.” Journal of Political Economy 98, no. 5, part 1 (1990): 1076–107.Google Scholar
Gropp, Reint, Scholz, John, and White, Michelle. “Personal Bankruptcy and Credit Supply and Demand.” Quarterly Journal of Economics 112, no. 1 (1997): 217–51.Google Scholar
Haines, Michael R.Historical, Demographic, Economic, and Social Data: The United States, 1790–2000.” Ann Arbor, MI: Inter-university Consortium for Political and Social Research, 2004.Google Scholar
Hammond, Matthew B.The Cotton Industry. An Essay in American Economic History: Part I. The Cotton Culture and Cotton Trade.” Publications of the American Economic Association New Series 1 (1897): 3382.Google Scholar
Haney, Lewis. “Farm Credit Conditions in a Cotton State.” American Economic Review 4, no. 1 (1914): 4767.Google Scholar
Heady, Early O. Economics of Agricultural Production and Resource Use. New York: Prentice Hall, 1952.Google Scholar
Hicks, John D. Populist Revolt: A History of the Farmers' Alliance and the People's Party. Minneapolis: University of Minnesota Press, 1931.Google Scholar
Higgs, Robert. Competition and Coercion: Blacks in the American Economy, 1865–1914. New York: Cambridge University Press, 1977.Google Scholar
Holmes, George K., and Lord, John S.. Report on Real Estate Mortgages in the United States at the Eleventh Census, 1890. Washington, DC: GPO, 1895.Google Scholar
Horan, Patrick M., and Hargis, Peggy G.. “County Longitudinal Template, 1840–1990.” Ann Arbor, MI: Inter-university Consortium for Political and Social Research, 1995.Google Scholar
James, John. “Banking Market Structure, Risk, and the Pattern of Local Interest Rates in the United States, 1893–1911.” Review of Economics and Statistics 58, no. 4 (1976a): 453–62.Google Scholar
James, John. “The Development of the National Money Market: 1893–1911.” Journal of Economic History 36, no. 4 (1976b): 878–97.Google Scholar
Jaremski, Matthew. “State Banks and the National Banking Acts: Measuring the Response to Increased Financial Regulation, 1860–1868.” Journal of Money, Credit, and Banking 45, nos. 2–3 (2013): 379–99.Google Scholar
Matthew, Jaremski, and Fishback, Price V.. Replication Files for “Did Inequality in Farm Sizes Lead to Suppression of Banking and Credit in the Late Nineteenth Century?” Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 18 September 2017. Scholar
Jaremski, Matthew, and Rousseau, Peter. “Banks, Free Banks, and U.S. Economic Growth.” Economic Inquiry 51, no. 2 (2013): 1603–21.Google Scholar
Jaremski, Matthew, and Rousseau, Peter. “The Dawn of an ‘Age of Deposits’ in the United States.” NBER Working Paper No. w21503, Cambridge, MA, 2015.CrossRefGoogle Scholar
Keehn, Richard, and Smiley, Gene. “Mortgage Lending by National Banks.” Business History Review 51, no. 4 (1977): 474–91.Google Scholar
Lamoureaux, Naomi. Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England. New York: Cambridge University Press, 1996.Google Scholar
Lee, Virgil. Principles of Agricultural Credit. New York: McGraw-Hill Book Company, 1930.Google Scholar
Marler, Scott. “Two Kinds of Freedom: Mercantile Development and Labor Systems in Louisiana Cotton and Sugar Parishes after the Civil War.” Agricultural History 85 (2011): 225–51.CrossRefGoogle Scholar
McGuire, Robert, and Higgs, Robert. “Cotton, Corn, and Risk in the Nineteenth Century: Another View.” Explorations in Economic History 14 (1977): 167–82.CrossRefGoogle Scholar
Minnesota Population Center. National Historical Geographic Information System. Minneapolis: University of Minnesota, 2004. Available at Scholar
Morman, James B. Farm Credits in the United States and Canada. New York: The Macmillan Company, 1924.Google Scholar
North, Douglas, Wallis, John, and Weingast, Barry. Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History. New York: Cambridge University Press, 2009.Google Scholar
Officer, Lawrence. “What Was the Value of the U.S. Consumer Bundle Then?MeasuringWorth, 2008. Available at Scholar
Rajan, Raghuram G.Rent Preservation and the Persistence of Underdevelopment.” American Economic Journal: Macroeconomics, no. 1 (2009): 178218.Google Scholar
Rajan, Raghuram G., and Ramcharan, Rodney. “Land and Credit: A Study of the Political Economy of Banking in the United States in the Early Twentieth Century.” Journal of Finance 66, no. 6 (2011): 1895–931.CrossRefGoogle Scholar
Rajan, Raghuram G., and Ramcharan, Rodney. “Crises and the Development of Economic Institutions: Some Microeconomic Evidence.” American Economic Review 106, no. 5 (2016): 524–27.CrossRefGoogle Scholar
Ransom, Roger, and Sutch, Richard. “Debt Peonage in the Cotton South after the Civil War.” Journal of Economic History 32, no. 3 (1972): 641–69.CrossRefGoogle Scholar
Ransom, Roger, and Sutch, Richard. Once Kind of Freedom: The Economic Consequences of Emancipation. New York: Cambridge University Press, 1977.Google Scholar
Redenius, Scott. “Between Reforms: The U.S. Banking System in the Postbellum Period.” Ph.D. diss., Yale University, 2002.Google Scholar
Rosenbloom, Joshua, and Sundstrom, William. “The Decline and Rise in Interstate Migration in the United States: Evidence from the IPUMS, 1850–1990.” Research in Economic History 22 (2004): 287324.Google Scholar
Ruggles, Steven, Trent Alexander, J., Genadek, Katie, et al. Integrated Public Use Microdata Series: Version 5.0. Minneapolis: University of Minnesota, 2010.Google Scholar
Schweikart, Larry. Banking in the American South from the Age of Jackson to Reconstruction. Baton Rouge, LA: LSU Press, 1987.Google Scholar
Snowden, Kenneth. “Mortgage Rates and American Capital Market Development in the Late Nineteenth Century.” Journal of Economic History 47, no. 3 (1987): 671–91.Google Scholar
Snowden, Kenneth. “The Evolution of Interregional Mortgage Lending, 1870–1940: The Life Insurance-Mortgage Company Connection.” In Coordination and Information: Historical Perspectives on the Organization of Enterprise, edited by Lamoreaux, Naomi and Raff, Daniel, 209–47. Chicago: University of Chicago, 1995.Google Scholar
Sylla, Richard. “Federal Policy, Banking Market Structure and Capital Mobilization in the United States, 1863–1913.” Journal of Economic History 29, no. 4 (1969): 675–86.Google Scholar
Sylla, Richard. The American Capital Market, 1846–1914: A Study of the Effects of Public Policy on Economic Development. New York: Arno Press, 1975.Google Scholar
Temin, Peter. “Freedom and Coercion: Notes on the Analysis of Debt Peonage in Once Kind of Freedom. Explorations in Economic History 16 (1979): 5663.Google Scholar
Tomich, Thomas, Kilby, Peter, and Johnston, Bruce F.. Transforming Agrarian Economies. Ithaca, NY: Cornell University Press, 1995.Google Scholar
Bureau of the Census, U.S.. Fourteenth Census of the United States: 1920. Vol. IV, Part I, Agriculture. Washington, DC: GPO, 1922.Google Scholar
Bureau of the Census, U.S.. Fifteenth Census of the United States: 1930. Vol. IV, General Report. Washington, DC: GPO, 1933.Google Scholar
U.S. Bureau of the Census. Sixteenth Census of the United States: 1940. Vol. III, Agriculture. General Report. Statistics by Subject. Washington, DC: GPO, 1943.Google Scholar
U.S. Bureau of the Census. United States Census of Agriculture: 1945, Special Report of Multiple-Unit Operations in Selected Areas of Southern States. Washington, DC: GPO, 1947.Google Scholar
Weiner, Jonathan. “Planter-Merchant Conflict in Reconstruction Alabama.” Past and Present 68, no. 1 (1975): 7394.Google Scholar
White, Eugene. “The Political Economy of Banking Regulation, 1864–1933.” Journal of Economic History 42, no. 1 (1982): 3040.Google Scholar
Woodman, Harold. King Cotton and His Retainers: Financing and Marketing the Cotton Crop of the South, 1800–1925. New York: Beard Books, 1999. Reprint of 1968 edition.Google Scholar
Wright, Gavin. Old South, New South: Revolutions in the Southern Economy Since the Civil War. New York: Basic Books, Inc., 1986.Google Scholar