Credit and Social Unrest: Evidence from 1930s China
104 Pages Posted: 15 Feb 2017 Last revised: 14 Sep 2019
Date Written: September 13, 2019
Do credit contractions trigger social unrest? To answer this question, we turn to a natural experiment from 1930s China, where the 1933 U.S. Silver Purchase program acts as a shock to bank lending. We assemble a hand-collected dataset of loan contracts between banks and firms, labor unrest episodes, and underground Communist Party penetration. The Silver Purchase shock results in a severe credit contraction, and firms borrowing from banks with a larger exposure to it experience increased labor unrest and Communist Party penetration among their workers. These findings contribute to understanding the socio-political consequences of credit shocks.
Keywords: Credit shocks, social unrest
JEL Classification: G01, G21, N15, N25
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