Free Banking and Bank Entry in Nineteenth-Century New York

Howard Bodenhorn

No 10654, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Previous studies of entry under New York's free banking law of 1838 have generated conflicting results. This article shows that different measures of entry lead to different conclusions about the competitive effects of the law. Measured by the entry of new banks, New York's free banking law led to increased rates of entry relative to other states. Free banking did not, however, lead to significant increases in capital accumulation in the industry. This paradoxical outcome resulted from the regulatory features of free banking, especially the bond security feature, which reduced profitability and incentives to invest in banking.

JEL-codes: N21 N41 (search for similar items in EconPapers)
Date: 2004-07
New Economics Papers: this item is included in nep-ent and nep-his
Note: DAE ME
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Published as Bodenhorn, Howard. "Free Banking and Bank Entry in Nineteenth-Century New York." Financial History Review 15 (2008): 175-201.

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Journal Article: Free banking and bank entry in nineteenth-century New York (2008)
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