Landed Interests and Financial Underdevelopment in the United States

54 Pages Posted: 23 Sep 2008  

Raghuram G. Rajan

University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Rodney Ramcharan

University of Southern California, Marshall School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 2008

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.

Suggested Citation

Rajan, Raghuram G. and Ramcharan, Rodney, Landed Interests and Financial Underdevelopment in the United States (September 2008). NBER Working Paper No. w14347. Available at SSRN: https://ssrn.com/abstract=1271379

Raghuram G. Rajan (Contact Author)

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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Rodney Ramcharan

University of Southern California, Marshall School of Business ( email )

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United States

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