Credit and Social Unrest: Evidence from 1930s China

87 Pages Posted: 15 Feb 2017 Last revised: 19 Dec 2018

See all articles by Fabio Braggion

Fabio Braggion

Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg University - European Banking Center

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Haikun Zhu

Erasmus University Rotterdam

Date Written: December 19, 2018

Abstract

Do credit contractions trigger social unrest? To answer this question, we turn to a natural experiment in 1930s China, where the 1933 U.S. Silver Purchase program acts as a shock to bank lending. This setting limits the scope for reverse causality, focuses the set of relevant social actors (factory workers and the Communist Party), and helps eliminate potential confounding factors through the use of micro data. We assemble a novel, hand-collected dataset of loan contracts between banks and individual firms, labor unrest episodes, and underground Communist Party penetration. We show that the Silver Purchase shock results in a severe credit contraction, and that firms borrowing from banks with a larger exposure to the shock experience increased labor unrest and Communist Party penetration among their workers. These findings contribute to understanding the socio-political consequences of credit shocks.

Keywords: Silver Purchase program, political unrest, financial history

JEL Classification: G01, G21, N15, N25

Suggested Citation

Braggion, Fabio and Manconi, Alberto and Zhu, Haikun, Credit and Social Unrest: Evidence from 1930s China (December 19, 2018). Available at SSRN: https://ssrn.com/abstract=2714815 or http://dx.doi.org/10.2139/ssrn.2714815

Fabio Braggion (Contact Author)

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Alberto Manconi

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Haikun Zhu

Erasmus University Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

HOME PAGE: http://https://sites.google.com/site/zhuhaikun2018/home

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