LAND RIGHTS, LOCAL FINANCIAL DEVELOPMENT AND INDUSTRIAL ACTIVITY: EVIDENCE FROM FLANDERS (19TH – EARLY 20TH CENTURY)

Nicolas De Vijlder () and Koen Schoors

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: In this paper we investigate the hypothesis that the economic divergence across Flemish localities between 1830 and 1910 is explained by the theory of Hernando de Soto. We hypothesize that the uniform land rights installed after the French revolution provided borrowers with an attractive form of collateral. Conditional on the presence of local financial development provided by a new government-owned bank this eased access to external finance and fostered industrial and commercial economic activity. Using primary historical data of about 1179 localities in Flanders we find that the variation in the local value of land (collateral) and the variation in local financial development jointly explain a substantial amount of the variation in non-agricultural employment accumulated between 1830 and 1910. By 1910 industrial and commercial economic activity was more developed in localities where both early (1846) rural land prices were high and early (1880) local financial development was more pronounced, which is in line with the “de Soto” hypothesis.

Keywords: de Soto; financial institutions; industrial development; land prices; Flanders; 19th - 20th centuries (search for similar items in EconPapers)
JEL-codes: N93 O43 R11 R12 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2019-02
New Economics Papers: this item is included in nep-fdg, nep-geo, nep-gro, nep-his and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:19/962

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