Landed Interests and Financial Underdevelopment in the United States
Raghuram G. Rajan
University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)
Board of Governors of the Federal Reserve System (FRB)
September 9, 2008
Chicago GSB Research Paper No. 08-12
U of Chicago GSB Working Paper No. 21
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.
Number of Pages in PDF File: 55
JEL Classification: G20, O16, O43
Date posted: September 11, 2008
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