Landed Interests and Financial Underdevelopment in the United States

Raghuram G. Rajan and Rodney Ramcharan

No 14347, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Landed elites in the United States in the early decades of the twentieth century played a significant role in restricting the development of finance. States that had higher land concentration passed more restrictive banking legislation. At the county level, counties with very concentrated land holdings tended to have disproportionately fewer banks per capita. Banks were especially scarce both when landed elites' incentive to suppress finance, as well as their ability to exercise local influence, was higher. Finally, the resulting financial underdevelopment was negatively correlated with subsequent manufacturing growth. We draw lessons from this episode for understanding economic development.

JEL-codes: G20 O16 O43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his
Date: 2008-09
Note: CF POL
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