How Important Are Banks for Development? National Banks in the United States, 1870-1900

Fulford, Scott

How Important Are Banks for Development? National Banks in the United States, 1870-1900

The Review of Economics and Statistics, 2015, vol. 97, issue 5, 921-938

Abstract: Do banks matter for growth, and if so, how? This paper examines the effects of national banks in the United States from 1870 to 1900. I use the discontinuity in entry caused by a large minimum size requirement to identify the effects of banking. For the counties on the margin between getting a bank and not, gaining a bank increased production per person by 10%. National banks in rural areas improved agriculture over manufacturing, moving counties toward geographic comparative advantage. Since these banks made few long-term loans, the evidence suggests that the provision of working capital and liquidity matters for growth.

Keywords: national banks; commercial banking; financial development; growth (search for similar items in EconPapers)
JEL-codes: G21 O16 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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Working Paper: How important are banks for development? National banks in the United States 1870–1900 (2014)
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