Access to Finance and Technological Innovation: Evidence from Antebellum America

78 Pages Posted: 22 Mar 2018 Last revised: 7 Jul 2020

See all articles by Yifei Mao

Yifei Mao

Cornell University - SC Johnson College of Business - Finance Department

Jessie Jiaxu Wang

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: March 18, 2018

Abstract

This paper provides new evidence on how access to finance impacts technological innovation and establishes the role of labor practices in shaping the finance-innovation nexus. We exploit antebellum America, a unique setting where staggered adoption of free banking laws across states encouraged bank entry, and regional divergence in the use of exploited workers generated heterogeneity in agricultural labor cost. We find that greater access to finance spurred innovation, but the positive effect on agricultural innovation diminished with the extent of labor exploitation. Where exploitative labor practices were pervasive, free banking aggravated labor exploitation, reduced labor cost, and impeded agricultural innovation.

Keywords: finance-innovation nexus, banking deregulation, technological innovation, finance and labor, exploitative labor practices

JEL Classification: G21, G28, O31, O16, N21

Suggested Citation

Mao, Yifei and Wang, Jessie Jiaxu, Access to Finance and Technological Innovation: Evidence from Antebellum America (March 18, 2018). Kelley School of Business Research Paper No. 18-21, Available at SSRN: https://ssrn.com/abstract=3143199 or http://dx.doi.org/10.2139/ssrn.3143199

Yifei Mao

Cornell University - SC Johnson College of Business - Finance Department ( email )

Ithaca, NY 14850
United States

Jessie Jiaxu Wang (Contact Author)

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

HOME PAGE: http://www.jiaxuwang.com

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